POWER PLAY

Mexico 2018 | GREEN ECONOMY | INTERVIEW

TBY talks to Adrián Katzew, CEO of Zuma Energía, on helping to shape the renewable energy model for Mexico, limitations in the sector, and the growing participation from commercial lenders in the market.

 Adrián Katzew
BIOGRAPHY
Adrián Katzew co-founded Zuma in 2014. Previously, he was responsible for the global project and acquisition finance team for the energy sector at Banco Santander, as well as Vice-President of Vestas in Mexico and Central America. He holds an MBA from Harvard Business School.

What role does Zuma play in terms of Mexico's goal to have 35% of its energy matrix come from renewable energy by 2021?

We are first and foremost a start-up dedicated to renewable energies. Zuma was created in 2014 by several private equity funds. Our mission was to mobilize capital and put it to work in this sector in Mexico. The key to our success has been the commitment to provide resources to build an outstanding team. By the end of 2018, we will have a portfolio of 800MW in operation. We are extremely excited about this prospect; it is a fairly spectacular achievement from our own perspective, and this came at a time when we were able to help shape the model that Mexico would follow through the power reform. We are an exception in the sense that by being a Mexican entity, the responsibility, value, and experience of the final decision-makers reside in the country. We are extremely proud to be experts in project development and in procurement, engineering, and financing here in our country. We contribute to the achievement of these goals by building financing projects, getting them contracted, and supplying clean power

What opportunities do you see in providing energy directly to major companies with long-term contracts?

There is a market out there, and the structure and requirements for clean energy certificates are applicable across all consumptions. Non-regulated consumers or qualified users can either go via a commercializing entity or directly to a market participant. There is, therefore, some nascent activity there; and several contracts have been signed in that space. As requirements continue to grow, that market will have its own needs and opportunities to execute projects together with private entities outside of auctions

Are there any major obstacles holding back the renewable energy industry in Mexico?

There are constraints, though there is no doubt the industry, together with the public sector, will find ways to address them effectively. Fortunately, Mexico is a large and diverse country, and there are areas where the environmental dimension is sensitive or security is an issue, and these are large, capital-intensive projects. In that sense, we are exposed to the local dynamics. That being said, one of the most prevailing limitations is perhaps the availability of interconnection capacity. It is more an opportunity than a threat in the sense that there is a need to invest more and develop larger projects in order to enable grid expansion. We are excited to find ways to make that work and continue to implement the projects at scale

What is your assessment of the commitment of commercial and development banks to the advancement of this industry?

We raised around USD900 million of financing to execute our portfolio in 2017. We use predominantly Mexican development banks and are also involved with a commercial bank as well as an expert credit agency from Denmark, where the turbine equipment comes from. We employ different structures and are extremely satisfied to have been able to contribute to the industry overall by being the first entity to have closed the financing of any projects as a result of the reform. Others that achieve their closings will look at the type of transactions that we have structured to define relevant references in terms of how financing will be structured moving forward. There are relevant elements of the auction contracts that need to be carefully assessed against the type of financing solution to be employed. I made the conscious choice to focus mostly on Mexican development banks because this was the first closing in the works, and we needed the decision makers to be easily accessible. Once more deals are closed, it will be easier for commercial banks to replicate, and we will see more participation from commercial lenders in the market.