ENGAGEMENT GOAL

A leading, publicly traded solar energy company sought new business opportunities resulting from Mexico’s historic 2013 Energy Reforms, but it needed assistance to understand and navigate the transitional period between the old electricity regime and the newly competitive market.

SERVICES PROVIDED

We counseled the company on bidding in Mexico’s first electricity power auction in 2016, in which it was awarded power purchase agreements to supply approximately 500 MW generation capacity from two solar facilities.  We subsequently guided the company through the many federal, state, and local regulatory and permitting hurdles that were required before construction on the two plants could begin.

Our work included policy analysis and advocacy regarding the new regulatory regime, including pushing for important environmental regulation modifications at the state level.  We connected the company with federal and state government officials with oversight over its projects, including with top officials at all four federal agencies with a stake in Mexico’s electricity market.  We also helped the company build and lead a robust team of specialists to streamline the process of obtaining its interconnection, generation, environmental and social impact permits.

OUTCOME

Our client made a strategic decision to exit generation operations to focus on its core business (solar panel manufacturing and marketing) and sold the projects in 2018 and 2021, respectively.  Monarch worked with the client throughout the sales process to make sure that it was able to achieve all closing conditions and successfully close the deals.

ENGAGEMENT GOAL

This client was introduced to Monarch in 2018 by another firm client from whom it had agreed to purchase a 430 MW solar portfolio that was still in the development stage.  The seller recommended Monarch, and we were hired to support the continued development of the plants including securing financing and seeing them through to commercial operations.

SERVICES PROVIDED

The first solar project passed fairly smoothly through the permitting process and construction phase as the local civil society and political classes were welcoming and most of the groundwork had been paved before the client acquired the project.  The biggest challenge was access to financing for plant construction through Mexico’s development banking system, since some key decision makers felt projects awarded under the 2013 Energy Reform should be funded through private investment.  Monarch worked with the client to carefully build and deliver a fact-based narrative in support of the project that would appeal to those skeptical of its merits for Mexico.

The second solar project, which would become the second largest solar plant in Mexico, ran in to far greater roadblocks that needed to be navigated.  First, a small but vocal group within the local indigenous population aggressively objected to the project.  Later, the project was swept up in the broader attack on private development projects under President López Obrador’s electricity reforms.  To resolve these issues, we leveraged our access to the Peña Nieto and López Obrador administrations to corroborate potential solutions and build support for them.  This included the relocation of the project to a neighboring state in response to the politically charged indigenous opposition.  It also entailed building bridges with the Energy Ministry, the Energy Regulatory Commission, the Environment Ministry, and state and local governments in Southeastern Mexico, for whom we developed a strategic narrative, each tailored to the distinct audience involved, that showcased the benefits this project would bring to the region.  We also led the strategy to wind down the second project’s original site to avoid negative reputational impacts to our client’s brand.

OUTCOME

Our client was able to secure more than US$140 million from development banks to finance the construction of the first project, which entered commercal operation in mid-2019.  The second project became fully operatinal in November 2022 after regulators came to understand the positive impact it would have by bringing power to a region long lacking sufficent electricity supply while reducing overall electricity costs and mitigating Mexico’s environmental footprint.  Monarch continues to work with this client to support its original two Mexican projects and to help it identify and pursue other growth opportunities in the country.

ENGAGEMENT GOAL

Our clients, two renewable energy companies – one solar and one wind – in Baja California Sur (BCS), had completed construction of projects that had been approved by the prior Mexican administration but ran into significant delays obtaining necessary approvals from the nationalist López Obrador administration to move forward.  After over a year of going nowhere, they independently sought our help in getting the Energy Regulatory Commission (CRE) to modify their permits so they could move to the testing and commercialization stage of development.

SERVICES PROVIDED

We devised a government relations strategy and built a narrative to showcase the benefits these projects would bring to BCS’s independent power grid, including highlighting the battery storage associated with each project, which would mitigate the intermittency of solar and wind fuel sources.  We first shared our client’s case with top-level diplomats (for both USA and Mexico) to secure their support for the projects.  We then identified and reached out to key stakeholders who would benefit from the projects including the grid operator CENACE and the Governor of BCS, to secure their support.  Finally, we worked closely with the leadership of both companies to prepare them for presenting their cases before the heads of CFE, the Energy Ministry, and President López Obrador himself.

As a result of these efforts, our clients were able to get the modifications from CRE they needed at a time when the regulatory agency was only signing off on permits for CFE, the national electricity company.  With the permits in hand, we helped our clients work with CENACE to avoid delays and successfully meet the very short commissioning test timelines allowed under the modified permits.

OUTCOME

Both projects are in commercial operation today and are often showcased by the authorities as an example of the beneficial impacts renewable projects with storage capacity can have for Mexico’s aging transmission infrastructure.  We continue to manage government interactions for both clients in an effort to increase their generation capacity and keep them in a positive light as they consider other projects in Mexico.

ENGAGEMENT GOAL

A fully integrated, global provider of liquified natural gas solutions was facing heavy delays in receiving the final permits from CRE for a fully-built, natural gas-fueled generation facility in Baja California Sur.  This facility, though not a core competency of the client, was required as part of a broader concession obtained under the prior administration to establish a liquefaction operation supplying much needed natural gas to the region.  Early in the engagement, our client was forced to stop supplying natural gas to CFE due to unnecessary regulatory burdens.  In addition, the client had extra liquifaction capacity within its global fleet and wanted to deploy additional assets to Mexico to seize opportunities created by high natural gas prices in Europe.

SERVICES PROVIDED

We worked closely with the client to prepare talking points and develop an outreach strategy for explaining how our client’s existing concession in Mexico is fully aligned with the government’s energy and social development plans for the country as well as how our client stood ready to commit significant more capital to Mexico if given the chance.  We then helped the client communicate this message to key constituencies to gain widespread support for the project.  Through our work, the governor of BCS and the grid operator CENACE quickly saw the value of the concession.  We also received the support of the U.S. Embassy in Mexico and a commitment from Mexican diplomatic officials to make sure the issue would receive proper attention.  With the backing of this wide group of supporters, CFE and, eventually, President López Obrador came to see the benefit of a stable supply of our cient’s LNG in BCS and how our client could help reduce the losses being incurred by the state-owned utility due to onerous take-or-pay natural gas contracts.

OUTCOME

Our client reached a multi-faceted, mutually beneficial verbal agreement with CFE (a) to sell the electricity generation facility at a reasonable price, allowing the utility to maintain its desired market share of generation in the region; (b) to resume the supply of natural gas delivered by our client and for a much longer term; and (c) to establish a partnership to build additional liquefaction facilities in the Gulf of Mexico and export the excess natural gas to the international market.  The parties have created a government-client task force with all federal agencies involved to streamline the different permitting processes in order to quickly formalize and implement the agreements.  It is a proverbial win-win for both parties and has been visibly promoted by President López Obrador as a sign of Mexico’s openness to foreign investment.

ENGAGEMENT GOAL

Our client, a large European investment fund, had agreed to purchase several power generation facilities and a natural gas pipeline from a major Japanese company, and it sought our guidance to help it gain the required approvals from Mexican regulatory agencies so it could close the deal within the seller’s strict timeline.  In addition, the client wished to establish relationships with key officials who could support the company as it expands its footprint in Mexico.

SERVICES PROVIDED

We devised and coordinated a two-pronged government relations strategy to make sure our client would receive a timely answer to its request for approval of the acquisition while also establishing itself as a friend to Mexico.  First, we approached the diplomatic missions of both parties to secure their public support for the transaction.  Second, we reached out to key energy and financial officials in the Mexican government to explain the beneficial impact the deal would have for the public electric utility as well as how the client could benefit the country’s business environment in general.

OUTCOME

Success was not guaranteed under the López Obrador administration, which was attempting to nationalize the electricity industry throughout the approval process, but logic won out, and our client was able to obtain all necessary approvals from the regulatory agencies and finalize the purchase before its expiry date.