Ricardo Cardiel
CEO and General Manager
Latin American Rainmakers
View from the Top

Fuel, Oxygen and Sparks for the Market

Sat, 02/03/2018 - 15:34

Q: In which segments is Latin American Rainmakers seeing greater demand for its business catalyst services?

A: The Energy Reform unlocked several areas of opportunity in every sector within oil and gas for companies to set a market foothold and to create the positive results that are critical to the country’s development and GDP growth. Exploration, project finance, power generation and human capital are only a few of the noteworthy niches. Latin American Rainmakers is analyzing several points of the reform where we can take advantage, primarily in power generation, infrastructure and business structure development. Our core business is to analyze the new projects emerging as a result of the reform and their context — technology, construction, commercial plan, regulatory/ legal, permitting and project finance. Five key ingredients must be present to ensure a project’s success: mastery of regulatory and environmental framework, a robust project finance plan, adequate technology, an impeccable EPC track record and a closed commercial agreement. Once all these elements are consolidated into a ready-to-build project, then we go out to raise the required capital for it. That is our essence and how we summarized our business development philosophy. 

Q: How does Latin American Rainmakers profile the right project for its skillset?

A: Power generation presents attractive opportunities, particularly in terms of distribution. Private newcomers to the market require power supply for their facilities, a requirement we can support. In the first stage, we can provide temporary power generation solutions while they conclude their interconnection to the grid. Next, we can offer power supply services in different ways. We are not limited to selling power generation plants and can also propose alternatives to our customers, such as avoiding high CAPEX by selling kWh instead of equipment. Design a financial structure to support these requirements during the exploration stage is also one of our strengths. Our specific scope within the oil and gas ecosystem involves supplying solutions for the new liquid storage systems in the pipeline. 

We work together with partners, O&Ms and technology firms to provide tailor-made solutions depending on the kind of project we are involved in. Our project portfolio is quite diversified and the specific needs of each are equally varied. Latin American Rainmakers has developed long-standing relationships with various major EPC companies in Mexico.

Q: How does a business developer consolidate a network of reliable partners?

A: Our constant starting point is to map out all levels of every opportunity that comes our way, finding the key players in every link of the business chain specific to each project. Rome was not built in one day and the same can be said of our network. We reap the seeds we sow from longstanding relationships with managers who became C-level executives. Latin American Rainmakers has grown parallel to its network members, including investment banking, equity funds, power generation firms and petrochemical companies. It is a constant effort as we also look to work with new players with which to launch the same long-term dynamic, particularly end users and financial entities.

Q: Where are the new waves of capital flow heading to within the oil and gas sector?

A: From our point of view, capital is moving in the direction of infrastructure projects with inherent attractive IRRs, provided by the long-term arrangements available. Some companies are more inclined toward risk-taking and focus their attention on upstream projects. Latin American Rainmakers focuses on hedge funds, equity partners and investors searching for measured and more conservative returns. In that sense, the IRRs of infrastructure projects are easier to measure, quantify and secure. For us, the essential factor of the oil and gas value chain has two major components: power generation and pipeline networks, both for natural gas and crude oil, including gas compression systems and stations. In the medium term, we expect several companies will be providing these services under long-term contracts, acting as an open door of opportunity for investors in infrastructure projects valued anywhere between US$5 million and US$200 million. 

Q: How intertwined are Latin American Rainmaker’s electricity and oil and gas business portfolios?

A: Those industries have evolved in parallel for a long time in Mexico. Our core business from the outset was focused on industrial systems and power generation with conventional plants using oil and gas. By 2009, we had our first renewable project, a wind farm in Oaxaca. As time went on, several other renewable energy projects were launched, especially as PV solar systems became increasingly business sound and economically competitive. Looking ahead, we believe our economy will remain largely dependent on oil and gas for the next 30-40 years. Yet, these finite resources will decrease over time and the core business of that sector’s major players, such as Chevron an ExxonMobil, is energy, not oil and gas. As long as these big players keep the lion’s share of their business directed toward the latter, however, many opportunities will remain within the oil and gas sector. 

Q: Are you developing any new services for the oil and gas sector?

A: Latin American Rainmakers always makes a point of crafting real value propositions that can permeate any sector, not just oil and gas, power generation and renewables. In the oil and gas sector, we have a lengthy history of providing equipment, pipeline systems, valves and metering solutions for day-to-day operations. In power generation, we offer cogeneration and energy efficiency solutions. We continuously survey the market for new developers, providing support, advisory services and financial solutions to align their business model to Mexico’s market reality and accomplish their goals. We are consolidating a coaching portfolio for newcomers or companies looking to expand toward unfamiliar territories with project finance, capital raising and investor attraction services.

Q: What are Latin American Rainmakers’ goals for the near future? 

 A: Our main goal is to provide effective solutions and consolidate our market foothold regarding the myriad opportunities, both present and future, within the oil and gas industry. We want to be the gold standard of business development structuration projects. Our business development philosophy, a guiding principle of our growth, follows combustion principles: fuel, oxygen and a spark are all necessary. All three are essential and irreplaceable for combustion to occur. In the same way, mapping the fundamental elements that detonate a bankable project is our main strength.