POWER May 2010 - 89

POWER IN MEXICO
Risks and Rewards
State control of the electricity sector may mean fewer customers, but it also
can mean clearer expectations.
By Clotilde Bonetto and Mark Storry, Global Business Reports
W
orking with the Comisión Federal de Electricidad (CFE)
can be a difficult, yet financially rewarding activity. In the
past 15 years the Mexican electrical sector has gradually
attracted an increasing number of international players, often to the
detriment of local companies.
Becoming the CFE's Preferred Partner
Felipe Ochoa, founder and president of Felipe Ochoa y Asociados,
a consulting company specializing in strategic planning for
national and international clients, believes that the influx of foreign
companies has been a major challenge for local firms, many
of whom now have difficulties in winning bids with the CFE. He
says, " We need the international participation of these companies
for their investment and expertise; however, we also need to promote
our domestic industry. Our country needs to have a strong
engineering base complemented by the presence of these international
firms. At this point in time most of the [independent power
producer] contracts have gone to international firms. I believe that
we need a stronger local content on these projects. So far there
haven't been many joint ventures or extensive collaborations. "
The problem for small companies is that they do not have adequate
access to finance, unlike many multinationals. This hinders
their ability to scale up and bid for large-scale projects that
the CFE and Petróleos Mexicanos (PEMEX) normally tender out.
They can tender to be a subcontractor for a specific part of the
original contract, but that is considerably less profitable.
Santiago Barcón is director, Power Quality and North
America for Arteche, a Spanish multinational designing and
manufacturing quality instrument transformers, relays, and substation-integrated
protection and control devices. The company
is also known as Inelap in the local market. Barcón argues that
there are two main drivers behind the lack of local participation.
First is the difficulty of accessing competitive financing for local
companies. Second, the evolving nature of the Mexican legal
framework makes it difficult for the CFE or PEMEX to take legal
action against their suppliers. As a result, they require very detailed,
complicated contracts to ensure that they are appropriately
protected, but that can put off potential entrants to the sector.
According to Arturo Carillo, general manager of Cimaltec,
a Mexican engineering company, " The main challenge to serve
global markets is the lack of financing. The Mexican industry
has the capabilities, talent, and knowledge, but there is no funding,
and that is a big problem. " He goes on to argue, " In order to
get the necessary resources, we need the international banks to
strengthen their confidence in Mexico, and this is a problem. "
Winning the Deal
This problem of bidding is elaborated on by Thomas Riedel, partner
at ASM Mexico, who distributes C.C. Jensen's filters for the
conditioning of oil and other fluids for the CFE's plants. He argues
that while the CFE is a valued customer, it took a great deal
of time and effort to win the CFE over. He has had to go to the
plant managers to explain his product and then to the zone chief,
May 2010 | POWER
www.powermag.com
89
who had the purchasing authorization, as well as numerous other
departments. " The CFE is an important client for us, but we feel
that there needs to be a quicker way of introducing new products
and services to them. We may manage to convince one plant manager
to introduce our products, but then we have to repeat that
process more than 100 times to cover the whole CFE. "
Other leading voices in the Mexican energy sector, such as
Enrique González, country head of Schneider Electric Mexico,
argue that the fact that the CFE is big and unified actually makes
it easier to do business. He considers the CFE to be a genuinely
world-class organization and a key pillar of his growth strategy.
Unlike other countries, such as the U.S. or the UK, where there are
many utilities, Mexico has just one: " In many of the other markets
we are involved in there are a plethora of different authorities, different
buyers with different needs, and different demands. Here
we only have one person to deal with, which certainly makes it
easier for us, " he enthuses.
Jorge Lozano, president of Prolec GE, a joint venture between
GE and the Mexican company Xignus, producing a complete line
http://www.powermag.com
POWER May 2010

Table of Contents for the Digital Edition of POWER May 2010
