The new energy reality in Mexico, the innovative financing models and the future of the industry during AMLO’s six-year period were some of the issues analyzed by the panelists present at the Mexico Energy Forum 2019, held on Wednesday at the Sheraton María Isabel Hotel in Mexico City.
The consequence of the cancellation of the fourth electricity auction was one of the topics covered during a panel of experts moderated by Alan Sakar, Associate Energy and Infrastructure at Clifford Chance. Héctor Olea, President and CEO of Gauss Energía, was optimistic, even though neither he, Gerardo Pandal, Commercial Director at Vive Energía, or Salomón Amkie, Director Head of Power and Energy of Citibanamex, believe that long-term auctions will not be held in the next two years. “The previous model is no longer valid because it no longer exists,” said Olea. “We have to recognize that and understand the change and be optimistic, because in changes there are always opportunities, as demonstrated by the Energy Reform. New business strategies will appear in which many participants will find investment opportunities.”
Pandal asked for dialogue and understanding with the government in the face of this new reality. “We have a new scheme and we have to listen to the government, because Mexico is a democracy. I believe that the interests are aligned. Everyone is looking for good electric power service at a good price and we have achieved this in Mexico after many years. The Mexican model has already been tested in other countries, achieving a sustained decline in prices,” he said. In addition, he explained that it is necessary to cover all the country’s demand, which differs greatly depending on the areas. “The growth of electricity demand is above what was expected in areas like the southeast but there are also other areas of the country with a generation deficit.”
Regarding the new financing models, Sakar said that after the macroeconomic changes that Mexico has experienced in recent years, the financial sector should be one of the main promoters of this industry. On this subject, Pandal pointed out that it is necessary to look for new mechanisms with the financial sector to find attractive rates for the industry. Olea added another financing alternative, which could also be developed, at least in the solar sector. “Storage is an alternative to private investment versus monopoly in the transmission system. The private sector can participate in that area through storage.”
Amkie believes development banking has played a very important role in the financing of projects in Mexico, which is a key to the future of the industry. “Development banking has tended to be the pioneer in some financing in a more aggressive way than traditional banking,” he said. “But I think that traditional banking and development banking will go much more hand in hand in the future.”