Transmission an Opportunity Area for Infrastructure GiantWed, 02/24/2016 - 17:16
Q: Transmission has become an attractive investment destination for players. What are some of Isolux Corsán’s most emblematic projects that showcase its permanence in the sector?
A: We began with transmission lines 25 years ago and we have a historic presence in this sector. Isolux Corsán is responsible for 5,000km of high voltage transmission lines and 50 substations, with a presence in almost every Mexican state. In electricity generation, the largest combined cycle plant we have built in Mexico, which has a 280MW capacity, is located in Rosarito, Baja California.
In addition to energy generation and transmission, the renewables industry has become increasingly important for the company over the past few years. In 2014 we finished the BOP for a 54MW wind park in Tamaulipas, and we were awarded the entire EPC for the construction of a 100MW wind park in the same state. We have another concession for a small 5-6MW solar park in La Paz, Baja California Sur, intended to sell electricity directly to CFE for a 20-year period under the small producer scheme. Even though this is a small park, it is significant because solar energy has so far seen very limited development in Mexico.
Q: Last year Isolux Corsán secured a contract to build 26km of transmission lines and ten substations in the Valle de México project. How are these developments advancing?
A: The company was very lucky last year in terms of awarded projects because we won three contracts with CFE for transmission lines in Huasteca-Monterrey, Valle de Mexico (Mexico City, Hidalgo, and State of Mexico), and 1116 Transformacion Noreste (Nuevo Leon).
We won two of the largest transmission contracts CFE has granted in the last years, with the Huasteca-Monterrey line, with 422km of 400kW transmission lines and an investment of US$127 million. The Valle de Mexico line amounts to 26km of transmission lines and required an investment of US$89 million, and 1116 Transformacion Noreste, which also has a substation, is 42km long with voltages of 400kW and 115kW.
In these cases, the capital comes from CFE in the form of public investments under the financed public works scheme. This is also one of the reasons we have stayed in Mexico for so long, since we have had the financial muscle to undertake capital-intensive projects.
Q: Are you planning on offering private companies services in building transmission lines and infrastructure for energy generation projects located in remote areas?
A: We believe this will be one of the largest areas of opportunity resulting from the Energy Reform. Although the regulatory framework is still unclear, we know that the law states that transmission and distribution are considered public services, and CFE will still hold ownership of the grid.
Regardless, the law considers the participation of the private sector and the possibility of forming alliances with CFE or other State productive enterprises. The law states that the private sector can participate by financing, installing, operating, managing, and upgrading transmission lines. We would like a clause that allows the private sector to develop transmission lines, since Mexico is a large country that will require significant investment in transmission lines.
Q: Do you foresee a future for public and private partnerships within the transmission sector?
Renewables experience bottlenecks in transmission due to the remote locations where these energies are produced, and this lack of infrastructure is a hurdle for the development of these sources. Our experience in this field is quite broad, since Isolux Corsán is one of the leading global investors in private transmission lines, but CFE knows a lot more about transmission, as it is a very experienced player. I believe that, regardless of the model, the authorities need private participation in this sector while respecting government ownership. At Isolux Corsán, we believe that it is important that the Energy Reform expands its scope in this line; the State could retain ownership while allowing private parties to participate in transmission. We acknowledge that private management will result in a more affordable development of the grid, as we have witnessed in other countries. If this segment opens to private investment, Mexico will certainly benefit because energy losses will be reduced, the required investments will decrease, and renewables will have a better chance of proliferating.