TBY talks to Jaime Luis Saldaña Méndez, Director General of SEISA, on the potential of bioenergy in Mexico.
TBY What is the potential for bioenergy and other renewables to play a major role in the Mexican energy market?
JAIME LUIS SALDAÑA MÉNDEZ In terms of renewable energy, Mexico is a “virgin” country. Investment opportunities have only begun to materialize in the past couple of years. The federal government has begun to issue a renewable energy law in Mexico. The laws are not just for the business sector, but also to lower the costs of injecting more power into the grid. We started in the energy business in the early 2000s. Since SEISA’s inception in 1992, we have suffered from high fuel costs, devaluations, and barrier implementation. The government has significantly helped companies like ours with the introduction of new legislation, which also extended to cogeneration efficiency projects. In 2012, we have five or six projects underway, most of which are cogeneration projects. SEISA is very well known in the energy sector, since it was the first company in Mexico working in the cogeneration segment. We are also working with other big players in the market, and have projects of the size 5 MW to 10 MW. SEISA has a lot of plans for Mexico, but the energy business is deeply tied to the politicians, and renewable energy projects are connected to the local or state governments. Most of the renewable projects we do need to be carried out through a partnership with the government. We have a good understanding of the situation in Monterrey, because we have been working with the state’s officials since 2003. The municipal authority has changed five times since then, but we have provided a number of savings to the government here. The amount the economy can save is driving this sector.
What is your relationship with the World Bank?
We formed a relationship with the World Bank in 2000 with the construction of our biogas-to-energy facility in Monterrey. The first contact with the World Bank was the grant it offered us to start the project in 2001. We have maintained our relationship with it by supplying Certified Emission Reductions (CERs) and carbon credits that the World Bank conducts through the Clean Development Mechanism. The Kyoto Protocol contracts we signed do not expire for another five years, and we will provide CERs until 2017. Given the opportunity to receive money from the global market, we can continue our operations. We have reached 17 MW in generating capacity using biogas from landfills, and we believe we can increase our capacity to 25 MW over the present decade.
What are some of the benefits of biogas?
We started operations in 2003 before the Kyoto Protocol was signed, with the goal of reducing carbon emissions. We also wanted to manage the risk of methane explosions from landfill gas. The benefits are largely for public entities, such as government buildings and Monterrey’s public squares. We can undercut Federal Electricity Commission (CFE) prices by about 10%-12%. Moreover, the revenues that we collect from our users are generally given back to the government. Without any law supporting or assuring our business, we are a private company successfully working with the public sector.
What are your activities outside of Mexico?
The core business of our cogeneration sector is based abroad. We have three companies in the US, one in Canada, and a few more in Colombia and India. We manufacture the technology in Tulsa, Oklahoma. In the past, we had an opportunity to invest in companies that could manufacture the equipment that can then be installed in Mexico. We got involved as soon as the law permitted private participation in the energy business in 1992. SEISA provides products and goods to many sectors—economizers, heath recovery systems, and cogeneration packages—for the US and Mexican markets. Most of the businesses are linked to oil and gas sector. It’s interesting because most of the companies in Tulsa provide goods to the petrochemicals sector, and Tulsa is a booming city. The economy is quite different from the rest of the US. We also try to invest in own products in our clients’ facilities, with the idea to share energy savings. The cogeneration package has more than 70% efficiency, and when companies use it to operate heating and/or cooling systems, they end up saving money. We have some sites abroad where we have provided this service for more than 15 years, and often renew our contracts. SEISA suffered a lot with the devaluation of the peso in 1995, and it also suffered in the recent global crisis and the price of gas. In the next decade, we will see more stable gas prices.
How did SEISA’s story begin?
The founder of SEISA, Don Javier Garza Sepúlveda, was a visionary member of one of the regional industrial families of Monterrey. He always viewed the laws passed in the energy business as huge opportunities to increase his business portfolio. Fortunately, the company decided to enter the renewable energy market because the price of gas was rising. He decided that the way business was conducted needed to transition to greener alternatives. The opportunity in the early 2000s was when the World Bank showed interest in SEISA. At that time, it was also very difficult to get government approval and negotiate with the CFE to connect our projects to the grid. However, it tried to direct future investment to the private sector and to provide subsidies to part of the population. If you see that gas costs are low, and the tariff is high, there is a huge margin to provide savings to your customers. We have a lot of opportunities here.
What is the future of your company?
This is our moment to grow, and become a larger market player. We are advising major companies that want work with cogeneration products as well. We have the know-how, people, and operational experience. We have also invested in our customers for close to 20 years. We can provide support to other companies, in terms of selecting the right turbine or engines, helping them select the right equipment, and make the right decisions. The energy business is not very well publicized in Mexico—everyone knows they should participate, but they are afraid of making huge investments, and the returns take time. We are working toward higher exposure in the market.
© The Business Year