In an excerpt from his exclusive interview with Mexico Energy Review 2017, Francisco Torres, Director General of Veolus speaks about the importance of using attractive financial schemes to help Mexican companies carrying out energy efficiency projects. To learn more about the Mexican electricity industry and Mr.Torres’s experience in the energy efficiency sector, get your copy of Mexico Energy Review 2017 during Mexico Energy Forum 2017 in Mexico City on February 15, 2017.
Q: What major changes did Veolus undergo when it became a Mexican-owned company?
A: The main change was our shift toward energy efficiency. We used to have a bigger focus on the operation and maintenance of highly technical equipment, which even led our employees to describe Veolus as a pure maintenance company. But that did not reflect the company’s true vision. Now we are working on strengthening our corporate image as an energy-efficiency expert. The focus of all our projects is to provide benefits to our customers in terms of energy savings and reducing consumption. We have three main business lines: O&M, energy efficiency and production and installations. Energy efficiency is our main focus.
Part of our technical strength comes from our O&M expertise and the knowledge we have in different types of technical equipment like HVAC, heating boilers, electric plants and substations, electrical stairs and elevators and , among others. These technical capabilities allow us to offer more comprehensive projects than the competition because several energy-efficiency companies in Mexico focus mostly on efficient lighting. We do work on lighting projects but we are capable of working with thermal energy applications such as HVAC systems, setting us apart from other companies in the market. For instance, we have installed steam and compressed air systems for industrial applications, which have included results-based guarantees. We remain with our clients during the project’s life span, providing O&M to the installed equipment and thus ensuring the system’s optimal functioning and providing guarantees on the agreed savings.
Q: Which competitive advantages have been key to succeeding in the Mexican market?
A: Our financing schemes based on performance contracting. We are one of the two Mexican Energy Services Companies (ESCOs) selected by the Inter-American Development Bank (IADB) to participate in their energy-efficiency program, which allows us to offer attractive financial structures to our customers. In this program, IADB covers up to 80 percent of the project’s total costs while the rest is covered by Veolus, a private investor or the client itself. CHP projects of up to 5MW, our target market, need an average investment of US$6-7 million but we can also finance energy-efficiency projects of up to 5MW, so having attractive financing is crucial. Last year we closed six energy-efficiency deals under this financing and we expect more to come in the months ahead. So far, all our customers are entitled to participate in this program except for municipalities and companies belonging to the federal government.
The IADB analyzed more than 40 Mexican ESCOs before deciding to collaborate with us. We were selected due to our expertise and capabilities in energy efficiency and CHP projects. All projects financed through this IADB line will be handled by Veolus and the other selected ESCO, representing an important stream of projects for us in the coming years.
Q: In addition to financing, what other challenges are Mexican ESCOs facing?
A: The lack of an energy-efficiency culture. Some Mexican clients tend to be suspicious about the periods needed to recover the investments required for energy-efficiency projects, which a few years ago was three to five years and now is up to eight to 10 years, depending on the size of the investment. The hardest part is to get clients on board for the first time. Once they have tested the benefits of energy efficiency, they tend to be eager to develop other projects with us. Changing the clients’ mindset is particularly difficult now due to the price per kilowatt-hour and exchange rate, which have extended the return on investment for projects.
Another important challenge is finding professionals with expertise in both renewables and energy efficiency. Veolus is tackling this barrier by emphasizing training and knowledge-transfer programs. We are one of the few companies in the market that has eight engineers certified by the EUREM (European Energy Manager) for Mexico.
Exclusive interview with Francisco Torres, Director General of Veolus
This is an exclusive preview of the 2017 edition of Mexico Energy Review. If you want to get all the information, plus other relevant insights regarding this industry, get your copy of Mexico Energy Review 2017. For information about other industries and exclusive networking events please visit www.mexicobusinesspublishing.com