February 2020

What is your main goal for 2020?

We will be focusing on the optimization of our existing portfolio and new fund creation.

Can you give a brief overview of Balam Fund's investments in Mexico? 

We are a Private Equity manager with exclusive focus on renewable energy generation, energy efficiency and sustainability in Mexico.

As of today, we manage a portfolio of operating renewable energy generating assets totaling over 500 MW (both wind and solar assets). We are primarily focused on self-supply projects; selling energy to large groups, such as FEMSA, Heineken, AT&T, Farmacias del Ahorro and Crown. We are also selling energy to the Mexican Wholesale Energy market through one of our solar projects.

What is your criteria for investment? Limitations? Size?

Our preference is to invest in projects with limited leverage, in the case of Mexico all the solar projects have been invested on a full equity basis (greater financial resilience and focus on yield). Our sweet spot are projects below 100 MW-150 MW.

Do you feel that the cancellation of the energy bid rounds have affected you? If so, how?

We have focused, as of today on a different strategy, primarily private contracts and merchant (in specific locations with lower congestion risk). We understand that now the goal should be to provide a long term solution to the transmission constrains or to design regional auctions with obligations in transmission investments (with the Government to implement).

What do you feel is the main challenge investing in renewables in Mexico?

The government needs to define clearly its strategic objective going-forward and the role of the private sector in that strategy. Our view is that, considering the large sums required to upgrade the generation and transmission infrastructure, the country clearly requires significant private investment. Also the Government is refocusing generation on “old” technologies with greater environmental impact, such as coal and diesel (with high levels of sulfuric content); wind and solar need to be critical assets within the energy matrix.

In order to secure the participation of the private sector in the future development of the generation infrastructure no changes should be made to the existing regulation; growth should be obtained via wholesale energy market consolidation.

Balam Fund invests in a few solar plants. What do you think is the biggest misunderstanding about solar?

Solar plants are faster to develop and involve a faster construction / installation process (compared to other conventional and renewable technologies). Also, they involve simpler operations and greater production level visibility in the long term. It also helps provide generation granularity (through distributed generation or smaller projects).

In markets which require fast implementation of new renewable capacity, solar always play a key role. 

Going-forward, batteries consolidation will be critical to further foster the consolidation of both solar and wind technologies.

What advice would you give to someone thinking of entering Mexico’s solar market? 

As a regulated market with potential strategic changes in the process of being implemented, obtain the necessary regulatory advisory from reputed law firms, involve local management with relevant expertise and be close to the main associations (in the case of solar, Asolmex) which can help have a more comprehensive view on everything that is going on.

And lastly, what one book or movie has changed your life?

Viktor Frankl’s “Man's Search for Meaning”. My preference are historical novels / books. I am currently reading Jordan Peterson’s “12 rules for life”