Enrique Giménez
Director General
Fisterra Energy
View from the Top

Stepping Stones to a Reinvigorated Market

Wed, 02/21/2018 - 10:32

Q: What needs to be done to improve Mexico’s Energy Reform?

A: The reform is a positive step forward for Mexico. Considerable effort was invested in it and there is an undeniable sense of quality in its provisions. There are two basic areas for improvement. Firstly, the reform is being implemented and regulated simultaneously, causing some inefficiencies in market operations, generating unease with potential operators and delays. Secondly, in Mexico the long-term and short-term electricity markets were launched concurrently. In our view, the long-term market has been predominantly prioritized because of the long-term auctions. Meanwhile, the short-term market lacks liquidity due to the scarcity of players operating in it. The picture of undeniable economic success and achievement of competitive prices does not reflect the day-to-day reality of the market.

Q: Could you elaborate on Fisterra’s bilateral transaction with CFE?

A: The new regulatory framework stipulates that power generators must sell all the electricity produced to CENACE and CENACE pays for it all. In turn, qualified suppliers have to buy all the electricity they need from CENACE and sell it to qualified users. Plus, qualified suppliers are obligated by law to purchase an additional 60 percent of its electricity consumption from a power producer through an energy-trading contract. Generators sell an additional 60 percent of electricity directly to qualified suppliers. This design flaw can be compensated through a financial bilateral transaction mechanism that power producers and qualified suppliers have at their disposal to alert CENACE of these additional energy-trading contracts so the government agency can adjust the amounts charged and paid to power generators and qualified suppliers. Fisterra Energy basically capitalized on this tool designed by the Ministry of Energy for Mexico’s electric market.

Q: With Blackstone, Ektria and Frontera México Generación, what is Fisterra’s strategy to avoid diluting your brand?

A: A brand is important for consumers. In our line of business, this is significant for the spot market. The wholesale electricity market is not so adamant about branding and is more concerned about financial statements and loan guarantees. Ektria oversees the spot market, while the rest of our branches focus on the wholesale market, where there are fewer players.

Q: What is the comparative advantage of Fisterra’s energy supplier branch?

A: Blackstone, our financial arm, provides the financial solidity our clients look for. Blackstone also provides an important input from the US electricity market that Mexico also uses. As a result, we can anticipate the evolution of the Mexican energy market because we have seen other markets mature. We have pioneered the energy financial trading market in Mexico in accordance with the tendencies we have observed elsewhere. We regularly release our forward price curve from one week to five years. Fisterra also helps represent small power producers, from 1-15MW power capacity, that are unable to take advantage of the opportunities presented by the developing regulations. Our company takes the power they generate to the market.

Q: What is Fisterra Energy’s long-term vision for Mexico?

A: Mexico is a country with tremendous opportunities in the energy sector. Mexico is ranked 15th globally in terms of energy consumption volume, and this consumption is expected to grow exponentially. Despite its few mishaps, the Energy Reform is sound. Our new-arrival status in Mexico gives us an important comparative advantage. Fisterra already provided the stepping stones toward invigorating the market through financial trading and we have high hopes in the development of this segment. Our company is also motivated by the announced midterm auctions. We will continue devising strategies in clientattraction, power generation and diversifying our product portfolios.

Fisterra Energy is specialized in energy infrastructure investments worldwide. Fisterra enjoys technical expertise and extensive experience in M&A, project financing, development, construction and operation.