Author: Angéline Fournier, CEO of Maeva Investments
Repost from LinkedIn
On September 14, 2017, I had the pleasure of being invited to speak at the Latin America China Investment Forum, which took place in Shanghai.
The participants were a diverse group of investment firms, banks, construction companies and environmental entrepreneurs, but they all shared one objective: understanding how to structure Chinese investments in Latin America.
Several of my peers and I were particularly interested in investment in the Mexican energy market. We shared our projects in electricity energy trading and oil trading. It clearly is a very exciting time to be investing in this sector, which was just partially deregulated after being under state-controlled monopoly (PEMEX for gas and oil and CFE for electricity) for most of the last 100 years.
First of all, the oil and gas extraction and distribution markets are about to be massively disrupted. As of April 2018, all gasoline distributors will purchase their gasoline and diesel from the international market. What’s more, the Mexican government will increase storage from 48 hours to 20 days by 2025, a very aggressive target. While PEMEX will maintain control of onshore and offshore production, it will withdraw from deep offshore production.
This provides at least three important avenues for international investors: distribution, storage and deep offshore drilling.
In addition to this, electricity deregulation is also moving ahead, more of less on schedule. After December 2018 deadline, industrial buyers will purchase their electricity from the market. CFE will retain the monopoly for the transport and distribution of electricity, but there is significant opportunity in the areas of transport and trading.
Electricity represents the most unique opportunity in the energy sector. The Mexican government has pledged that nearly 30% of its energy will be green by 2025, up from less than 5% currently.
There is currently work being done to develop solar farms in the North West (Sonora) and the South East (Yucatan), which benefit from nearly 320 days of sunshine per year. The Yucatan peninsula is also the target of massive wind farm projects, notably with the Chinese firm Envision, which will contribute to its GDP growth of 6.8% (higher than anywhere else in the country).
For China, which has enormous investment capability and a clear interest in sustainable energy, the Yucatan is an extremely interesting area. Not only is it clearly well positioned for renewable energy, it also is stable, well governed and has a strong economy. These are assets that point to an advantageous return on investment with less risk that in more volatile areas.
I was glad to hear from my Chinese counterparts that the Mexican market was of great interest to them. It was an especially interesting discussion since those opportunities can be successfully grabbed if companies are carefully guided through some of the complexities of this market.