Oscar Hernández
CEO
BIION
/
Insight

Tailored Financing to Decrease Risk

Wed, 02/21/2018 - 13:02

Distributed Generation projects are on the rise but developers still need to break through the culture of skepticism among potential clients that continues to be a barrier to wider acceptance, says Oscar Hernández, CEO of BIION. “Many people still do not believe in energy projects,” he adds, pointing out that much of the fear is caused by investing in something new, such as technological innovations. “Both the clients and the financing institutions are not sure whether the project will work. It is the project developer’s duty to show them that the investment in technological innovations has to be made only once. That is the only way the market will expand.”

The best way to fight fear and skepticism, Hernández says, is to make the project crystal clear for clients. A consultancy such as BIION implements innovative technologies to solve energy efficiency problems, ensuring the project starts with the most basic and cost-effective energy saving procedures. “Once the energy savings are covered, we can go one step further and install energy generation systems,” he says.

Sometimes it takes out-of-the-box thinking to convince a client of the benefits of an energy project. “One of our clients had a really strong position on solar panels: he did not believe they worked. After conducting a study on the energy needs of the company’s warehouses and possible cost-saving measures, we concluded the best way to go was installing solar panels. Selling a MX$200,000 solar system to a client that did not believe in the solution would have been impossible if we had followed traditional methods,” Hernández explains.

For the client to get on board, Hernández decided that BIION would absorb all the risk. “We created a contract wherein the client would only pay 50 percent of the project upfront. If the project reflected savings on its energy bill in less than six months, it would then pay the other half of the project. If not, we would return the 50 percent already paid and take the solar system away. This meant that for the client there was no risk in installing the system at all.”

BIION installed the system and after less than six months, the energy bill of the client decreased as expected. The client was so happy, Hernández says, that he now wants to expand the system. “We are now finishing the installation of the third system.”

This zero-risk strategy, although effective, is not for everyone. Hernández points out that client potential and credit history should be determining factors. BIION does not have deep enough pockets for a generalized zero-risk strategy but it can offer financing tailored solutions and advisory services, says Hernández. “For interested clients, we can be flexible and offer solutions that range from splitting the payments to using a mixture of capital from the client and credit. We are very open in that area, and have even developed crowdfunding tools. We can help companies in the process of getting a FIDE or FIRA credit, or a SAGARPA subsidy for farming projects. Being certified by those very same institutions offers investment security to our clients.”

Hernández adds that thanks to the company’s hard work and the trust it has cultivated among clients, BIION’s market has expanded organically via personal recommendations from satisfied customers. As successful as the company has been, Hernández still believes that both the government and financing institutions could do more to promote energy projects. “Financing is without a doubt one of the main constraints clients face. They might know that they want savings and install the equipment, but the lack of capital is a reality that hits straight away,” he says. “More tools for small and micro consumers could be developed. Despite being the largest share of the market, they keep facing the biggest obstacles in obtaining loans.”

With a strong presence in the residential and commercial sectors, Hernández is now looking for possibilities to participate in solar park installations. “We believe that teams enrich companies. We have qualified personnel with strong experience and expertise in the industry, both in the technical and management areas,” he says. “We have the capacity to develop large-scale projects. We are just looking for ways to grab those opportunities.”