What New Business Opportunities Has the Reform Unlocked?Wed, 02/21/2018 - 17:44
International newcomers, recently created companies and veteran corporations looking to branch out toward attractive sectors. All are looking to capitalize on the new business opportunities brought about by the effective end of Mexico’s 70-year monopoly. Increased renewable energy-powered electricity and developing a fast-paced competitive electricity market are the priority. Be it utility-scale projects to submit in the long-term electricity auctions, PPAs, power generation, trading, ancillary services or participation in transmission and distribution tenders, the private sector is certainly taking a closer look for both sustainable and profitable growth.
Our 20-year experience in the electricity sector made renewable energy the logical next step for growing our business. We consolidated our added value by integrating five must-haves in the electricity sector and applied them to renewable energy. First, a firm grasp of the industry’s regulatory framework. Second, project financing, since it is the backbone of any project. Third, technology; by using the discounted cash flow (DCF) method, we can select the technology that is best suited for a project, based on ROI criteria. Fourth, we incorporated EPC solutions in our portfolio. Last, but definitely not least, commercial strategy. All the previous elements are rendered useless without a landed PPA to sell the project.
Taking into account the profile of investors we work with, we will definitely focus on the least risky projects, with a portfolio of 10-12 projects in power generation, energy storage, energy transport and oil and gas exploration and production. The latter is the riskiest subsector among those we are involved in but these risks can be mitigated by strong investments and generating good yields. We are evaluating two sectors with high demand: electricity generation, given the lack of power producers in the market, and energy infrastructure. Mexico is largely underdeveloped in energy infrastructure, which justifies our evaluation of hydrocarbon and natural gas storage projects as well as transportation via oil and gas pipelines. For the next public auctions, we are also examining electricity transmission towers and substations.
Yingli Solar manages traditional market products such as the delivery of both mono and polycrystalline panels. At the same time, Yingli is positioning its prepackaged solutions in the market. These are ready-to-install 50-100kW on and off-grid systems and include batteries, inverters and solar panels – everything the project developer requires for installation. The market has been very receptive to this solution. Another significant advancement we have made is our PANDA mono crystalline panel, which offers efficiencies of up to 20.1 percent. This is almost 30 percent higher than the market average. We expect this panel to provide a huge advantage in the industrial distributed generation segment, in which a lack of space is often a big problem.
Narcís de Carreras
Our priority remains focusing on the growth of our core business in natural gas distribution. CRE’s last public tenders prior to the Energy Reform for natural gas distribution zones in Sinaloa was awarded to us, both in 2014 and 2015. We want to grow in parallel to these zones. The reform’s new rules and sector growth priorities have simplified the process considerably. Competitive and public tenders are no longer required to grow. Now, if we have a particular growth interest in a certain region in the country, we only have to ask for a distribution permit from CRE. Consequently, we have requested permits to expand in Campeche, Yucatan and Quintana Roo and we are already permit-holders in Tabasco. This simplification process gives a considerable boost to Mexico’s downstream natural gas distribution sector and is in line with one of the core objectives of the reform: magnifying natural gas and renewables use in Mexico.
In Mexico, there are only 38 companies that work under a PPA scheme, our Energía Real branch among them. Through this branch we developed the Plaza Arcos project, where we made an entire shopping center 100 percent renewable. This project will be used as a business case for the future expansion of the company. Another of our branches will participate in the long-term electricity auctions. We have two projects in a JV with a company from Uruguay that are ready to be offered in the third electricity auction. Although we are entering into utility-scale projects, we still consider distributed generation our core business, and the niche where we will grow the most.
Generally speaking, renewable-energy projects mostly require process automation at the moment, especially for grout installation. Electric installation, material supply and inputs are practically standardized. We recognized that our strength in this sector would be to support developers and contractors in bringing projects to completion. CODISA’s business opportunities arise when our clients do not have everything they need at their disposal. The provision of concrete for wind farms is a good example. To adapt to an increasingly demanding market, we integrated the required permits and certifications into our services and can offer a comprehensive package of concrete solutions to create infrastructure and facilitate access to remote locations. This strategy will underpin our growth because it will allow us to take on civil engineering projects.
Modifications to the secondary energy laws under former President Salinas de Gortari in the early 1990s opened the market to private participation, national and international owners. These modifications attracted international participants, and the electricity sector saw significant growth in a relatively short time. The recent changes in the Energy Constitutional Law are interesting opportunities for participants of all kinds in the market boom that is just about to begin. Since the construction of the first privately-owned power generation plant in Mexico, the experience Kepler offers in this field includes production of more than 12,000MW, construction of over 30 power-generation plants, across simple, combined cycle, internal combustion and coal fuel. The high productivity levels we guarantee makes us, if not the best, then one of the best options in Mexico.