Ezequiel Padilla Rodríguez
Director for Infrastructure and Energy
Banco Interacciones
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View from the Top

Oil and Gas Companies Alerted to Eager Financing Partner

Wed, 01/21/2015 - 13:17

Q: What are the ambitions of Banco Interacciones in the energy sector?

A: Banco Interacciones’ core business will continue to be lending directly to state and municipal governments, usually with a guarantee of federal government participation. Our experience with this type of risk has given us substantial expertise in developing highly structured financing products, including off-taker risk evaluation. The next obvious step in the bank’s growth strategy has been to move into the infrastructure market with the same off-takers. The bank started to actively finance contractors and service providers that were performing public works for state governments, municipalities, state agencies, federal agencies, and parastatals, including PEMEX and CFE. We are focused on providing highly structured loans to finance contractors and service providers of the energy, electricity, and infrastructure sectors. At the moment, the bank is becoming much more active in its existing lines of business, mainly financing PEMEX contractors and service providers as well as its subsidiaries and affiliates. Our approach is tailor-made and agile, always taking into account our clients’ objectives. We offer credit lines based on a company’s funds and the ability to use additional resources. Banco Interacciones offers special lines of credit that can be destined to finance payments in advance or revolving credit lines for working capital. All of these have been designed while taking into account how PEMEX operates with its contractors and providers. Our products can provide significant leverage as part of a financing package, far more than could be offered in a corporate loan. Banco Interacciones does this for short, medium and long-term projects because we focus much more on the project and the contracts than on our client’s balance sheet. This institution is also one of the few banks to have an engineering department focused on due diligence. Another relevant matter is that we can finance in both pesos and dollars. This gives us and our clients much more flexibility, adding to the tailored approach that every product requires. This flexibility also allows us to respond rapidly to contingencies that can emerge along the way. For instance, it is well-known that PEMEX often delays its payments, so we are now able to act on this contingency and offer short-term financing alternatives to our clients. A final factor is our ability to react and provide assistance for clients that decide to act on a particular bid at the last minute.

Q: What are the main risks that Banco Interacciones evaluates before deciding to finance an oil and gas supplier or service provider?

A: The key risk that we evaluate relates to payments. We are very careful to evaluate the contract that is being signed between our client and the off-taker, usually PEMEX or one of its affiliates. We like to make sure that our client is able to effectively perform according to what it has been hired to do, that it will be paid and, especially if it is a new client, we like to make sure that it is the right company to deliver on the projects being planned. The bank places serious emphasis on its clients’ technical capabilities, as much as on their financial competence. Our experience working with the public sector has granted us serious expertise in dealing with infrastructure projects, such as pipelines. This substantial experience has also given us serious expertise in dealing with right of way permits and processes, so we can advise our clients and contribute to their effectiveness.

Q: How has the Energy Reform changed the risk analysis performed by Banco Interacciones?

A: We will be reviewing our risk analysis methodology, as will most financial institutions. Regardless of whether it is a parastatal or a productive enterprise of the state, PEMEX will remain totally owned by the Mexican government. In that regard, it is our view that PEMEX’s profile will not change substantially as it will maintain its AAA credit rating. That is why we have not changed our perspectives on risk nor our parameters for dealing with PEMEX. If our client has been contracted by PEMEX to conduct a public work or service, we will still look very favorably into financing the project.

Q: What is one of the major changes you have seen since the Energy Reform?

A: There have long been many opportunities for bank financing in Mexico, including our credit line dedicated to temporary cash management. However, many companies were not looking for bank financing before, as they worked on small contracts. Now that they are expanding their scope to work on larger projects, many companies will need financing and Banco Interacciones is able to provide it. We are uniquely positioned to finance companies that do not have the long financial track record that other institutions require.