LatinFinance - July 2013 - 43

Mexican renewables

“Given Mexico’s mature administrative and legislative
environment and the financial sector’s growing familiarity
with the specifics of new renewables in Latin America and the
Caribbean, plus the given resource base and economic stability
and sustained growth, this will no longer be considered a trend
but rather investment mainstream in the very near future.”
Wind energy continues to become more competitive, says
Miguel Ángel Alonso, director of Acciona Energía México.
Multinational companies are piling in.
He points to the 556.5 megawatts the company has installed
and operated on the Isthmus of Tehuantepec, and the company’s
interest in also having a presence in the northern part of the
country, where developing wind power is becoming increasingly
popular.
“Acciona aims to continue to be a
Energy for sale
major player in this development with
Off-takers, who buy the energy, come in
a view to achieving a market share of
two types. One is the Mexican statearound 15%, either operating its own
owned utility Comisión Federal de
facilities or for other companies in
Electricidad (CFE), which, under the
this period,” he says. Financing will
country’s “small production” regime,
come mainly from commercial banks,
buys up to 30 megawatts of electricity
investment funds, insurance companies
under 20-year power purchase
and private sector entities, he says.
agreements (PPA). It can also buy
Capital markets are also an option:
energy and capacity under a competitive
Acciona placed $298 million of project
bidding process, which allows for a
bonds in August 2012 to finance two
25-year PPA.
wind farms in the Oaxaca province.
Private sector companies comprise
The government is also pushing
the second buyer group. They must
renewable energy. In 2008, it introduced
be similarly financially strong to bring
a bill to promote renewable energy
certainty to expensive renewable
Nicola Melchiotti, Enel Green Power
that added transparency to pricing and
projects. Firms such as Walmart, Bimbo,
equalized the cost to send it anywhere
Volkswagen and Ford, have signed such
in the country. By 2009, the first wind
deals.
farms became operational under the new legislation. Further
For now, the cost of solar power is high, which makes it
regulation allows surplus wind energy to be banked with the CFE
difficult to compete on price against other forms of production.
for credits when the wind is not blowing.
As gas prices rise, which Olea expects in a few years’ time, CFE’s
energy prices will also edge up and it will become easier to offer
A bright future
attractively priced solar energy.
Investors from Brazil, Italy, Portugal, Spain, the US, and the UK
But crucially, he says, the price of solar technology must fall
are showing interest in financing renewable projects. Where
in order to make it more viable.
previously largely strategic investors and utilities dominated,
“Although Aura Solar has been developed under a small
today more financial and local investors are getting involved,
production regulatory regime, we see the self supply approach
Sowitec’s Buntrock says.
more sustainable in the future,” Olea says.
Investors look for grid access, PPAs and underlying
“However, the levelized cost of energy (LCOE) for solar
economics which can include currency, ratings and political,
energy needs to come down in order to compete with wind
regulatory and technological risks.
and mini-hydro technologies. We expect that solar power will
Italian renewable energy specialist Enel Green Power has a
be ready as a mainstream alternative in two to three years.
growing footprint in Mexico. As a large emerging market with
Meanwhile, we have to work with out-of-the-box innovative
strong renewable prospects, Mexico’s stable democracy makes
solutions such as Aura Solar I.”
investment attractive, says Nicola Melchiotti, head of in the
Investors look favorably on the combination of elements in
company’s Mexico and Central America operations.
hydro and wind, including the rate of return, stable long term
“It has good prospects to sustain economic growth, and
cash flows and quality off-takers, and the stable regulatory
therefore demand for electricity and infrastructure.”
and legal environment, says Kai Buntrock, CFO of the German
Enel Green Power has a 102 megawatt wind farm called
renewable energy developer Sowitec, which operates wind farms Sureste under construction in Oaxaca. It adds to the Stipa Nayaa
in LatAm.
project, which has 74 megawatts of installed capacity, and
Larga wind project. Discussions are understood to have started
as early as 2006, although it took until 2008 for off-taker Grupo
Bimbo to sign an 18-year power purchase agreement (PPA) with
Renovalia Energy, which developed and owns the wind farm.
Mexican institutions Bancomext, Fondo Nacional de
Infraestructura and Nacional Financiera financed the project
alongside commercial banks La Caixa, Espírito Santo and
Santander.
“Commercial banks tend to be prudent in looking into
bankable projects,” says Olea. “However, we see commercial
banks moving very rapidly into solar development in the next
couple years, once projects like Aura start making inroads in
the sector. We have seen this picture before, with wind power
development eight years ago.”

“You can find renewable projects
developed by small and agile
companies, both Mexican and not,
by large utilities, by local industrial
groups, by banks and by other
players. It is a diverse and thriving
landscape”

July 2013

LatinFinance 43

LatinFinance - July 2013

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