Steps to Come After the Energy Reform

Q: What role did Coparmex play in ensuring that the implementation of the Energy Reform would benefit the country and your members?

A: The secondary laws are essential, and Coparmex wants to promote Mexican companies. This means firms with Mexican employees, regardless of the shareholders’ nationalities. We have talked to the government about creating a platform that would enable industry leaders to communicate with the government and develop the secondary laws together. President Enrique Peña Nieto believes that collaborative efforts are essential to successfully implement the Energy Reform, which will be the biggest development for Mexico since the signing of NAFTA.

Q: What are the main steps in the implementation process of the Energy Reform?

A: During the first 120 days, SENER is going to design the types of contracts that will enable private companies to work with state-owned companies and address technical issues affecting tenders. The National Hydrocarbons Commission (CNH) will work on the guidelines for the bidding process to authorize offshore exploration and production. CRE will focus on the permitting process for the storage, transportation, and distribution of hydrocarbons. The Treasury will set the conditions for the tax and royalties associated with the new contracts. The laws pertaining to environmental affairs will have been developed as well. Before the end of 2014, two organisms, the National Center for Natural Gas Control (CENAGAS) and the National Energy Control Center (CENACE), will operate the natural gas transportation system and electricity transmission infrastructure. This initiative will help us plan ahead. The President plans on having affordable gas delivered throughout the entire country. Currently we are using expensive gas, despite having shale gas, but the legislation is not currently in place to develop that sector.

Q: What are the recommendations of Coparmex regarding the participation of the private sector?

A: The Energy Reform enables the private sector to choose the way in which it wants to build transmission lines, since CFE cannot build all the required infrastructure. These energy lines will be used exclusively for the exchange of energy between private companies, but not for public services. According to the Energy Reform, PEMEX and CFE must make all necessary changes as state-owned companies to improve their profitability and efficiency, and make the right decisions to become part of a competitive world and deliver affordable power.

Q: What do you see as the future role of medium sized companies, both as power producers and as off-takers?

A: We want to develop projects for the sale of energy between medium-sized companies and help them build needed power plants. If a medium-sized company is willing to build its own power plant and sell energy to others, we will help them gather a group of off-takers into an industrial park or a cluster. However, we must work hand in hand with financial entities because if we do not have PPAs with a strong financial index, we will have a problem. The way to finance a project is through companies with high credit ratings, which does not depend on the size of the company. We need to group these companies and, with the help of financial institutions, review their credit history. Of course, there is always a level of risk involved but creating a cluster of medium-sized companies decreases that risk potential.

Q: Each industry has its own priorities for the Energy Reform. How did Coparmex ensure a unified approach among its many members?

A: We organized roundtables for the different industries in order to get their feedback, understand their concerns, get multinational companies on board, understand what is happening internationally and bring in their expertise. We created an agenda in cooperation with the government based on each sector’s diagnosis, their ideas and global trends. For renewables, the proposition was to open the sector and enable the sale of electricity between private companies, promoting energy efficiency and opening the sector for private projects in transmission and distribution. The grid is owned by the state, so if you want to build your own project you have to make sure that CFE gives you access to the grid.