Carlos E. Williamson
View from the Top

Flexible Funding for Suppliers and Contractors

Wed, 01/21/2015 - 10:04

Q: How have the Energy Reform and other key external factors influenced the development of Navix?

A: Since the implementation of the Energy Reform, we have been helping many of our clients to position themselves in the country and take advantage of all the opportunities that are opening up. We finance service companies and suppliers for the oil and gas sector, whose only client has typically been PEMEX. Eventually, they will have the opportunity to serve foreign companies which presents a huge opportunity and a big challenge. These new companies are used to very high technology and process standards. As such, Navix can help its clients improve their financial assets, update their equipment, and instill proper standards in their operations so as to prepare them to succeed in this new operating environment. The Mexican service industry can become a very important regional player but these companies need financing to get there. Another challenge is PEMEX’s corporate restructuring, which has likely created some confusion for our clients since these changes affect the people our clients interact with, signed contracts with, or gained project authorization from. There have also been many delays in the payment of contracts signed before the Energy Reform. We hope that PEMEX will soon put its house in order and finalize the contracting process. In that respect, 2014 was a difficult year. Finally, the drop in oil prices was a blow that nobody saw coming. The companies we finance have not largely been affected so far but the low oil prices have led PEMEX to seek to renegotiate with larger contractors in certain fields.

Q: What are the advantages of your financial solutions in comparison with other sources of financing?

A: First of all, we consider ourselves to be more than just a financier lending money to companies. We really try to understand the business of our clients, and we commit to growing with them, which is a different approach from typical financial players. We are not regulated, so we have more flexibility to structure our loans to really meet our clients’ particular situations. Another key aspect, which is not commonplace, is that we will put 100% of a project’s financing needs. Some may view this as too risky but we believe that the risk is more substantial when we only invest in part of a project. We prefer to make sure that we provide all the resources a project requires. The logic of this strategy has been proven by the very low levels of non-performing loans on our books. Another aspect is that in trying to understand what our clients do, we turn to experts. We have more petroleum engineers and civil engineers than bankers monitoring the projects we are financing, which makes a big difference. There is no other institution that really focuses on understanding the projects that it is financing in a similar way.

Q: What potential impact could PEMEX’s supplier development initiatives have on Navix’s risk assessment of suppliers and service providers to PEMEX?

A: We are very excited about the possibilities of this move. Any measures or steps taken to improve the level of organization, corporate governance, and sophistication of the suppliers are very important. We actually carry out a similar process when we sit down with our customers. We work with our clients to impose measures such as improved corporate governance, fiscal reports, and many other elements that companies are not used to but need to become a supplier for PEMEX and the foreign companies entering the market. We have talked to PEMEX about this very subject and we are happy to assist it in any way we can to help our customers get to the level PEMEX seeks.

Q: Which areas of the oil and gas sector is Navix planning to focus on in the coming years?

A: We see two important challenges and opportunities for our company. One is to start expanding the financing we offer to clients that serve companies other than PEMEX. We are glad to start working with many of the companies that are arriving to Mexico and whose suppliers need financing. That is where Navix will take on a new role. Mexico will now have a whole array of companies that are going to require our services via their suppliers. Another area we will start focusing on is financing assets. Most of our financing projects have been focused on financing working capital, but given the changing competitive landscape, companies must have state-of-the-art assets and technology to survive. That will imply a different mindset to implement financing solutions, as financing an asset usually requires longer-term financing than financing working capital. We are preparing ourselves for that and we see real opportunities for Navix in this environment.