Luis Arizaga, a partner at Exus Renewables, talks to The Energy Year about the outlook for the renewable energy space in Mexico, factors that set the company apart from the competition and its joint venture with Glencore. Exus Renewables is a global independent power producer focused on the development and asset management of renewable energy assets.
What outlook do you have for the renewable energy space in Mexico?
Firstly, the administration’s declaration that it will open the way for 46% private investment in the country’s electricity sector tells us nothing. This is nothing new as it is just a reaffirmation of a law announced a few years back which already granted the private sector the right to 46% of the country’s electricity generation. Therefore, there are still a lot of doubts about what this really means in practice.
Although from outside of the country Mexico is still viewed favourably as an investment destination, the truth is that, at the moment, within Mexico, there is still a lot of fear surrounding what the government is going to do. What is clear is that the country needs to build new projects and evolve towards developing renewables due to growing demand for energy.
However, due to the previous government’s war on renewables, many companies are wary of acting before there is more clarity. They need to understand that in Latin America there is always risk, but the returns are bigger. The industry doesn’t need to be afraid. The key is to mitigate risk. For example, when AMLO [former President Andrés Manuel López Obrador] arrived in 2018, we had around 250-270 MW in renewable energy asset management. Now we have almost 2 GW. AMLO killed renewables, but only for some.
Tell us about Exus and what sets you apart from the competition.
At Exus, we do the complete asset management of brownfield projects, of which today 60% are solar and 40% are wind. 2024 was a bit shaky, but we have advanced in projects, negotiating about four SPAs, with a potential investment of between USD 300 million and 600 million. These would add another 400 MW of wind power generation to our portfolio on top of our existing capacity from our Gemex, La Mesa, El Porvenir and Victoria wind farms.
With regard to asset management, there is no project that we have taken on that has not improved. What sets us apart is the speed and efficiency of our corrective maintenance, as well as the technology we have which allows us to provide this added value. For example, if all of a sudden a particular class of panel fails in Pittsburgh, our systems will alert the team in Tamaulipas that they should keep an eye on those types of panels there too.
Furthermore, in La Condesa in Mexico City, we have one of the most powerful control centres in the country. This allows us to control and monitor projects, assessing big data to improve our predictive maintenance and therefore the operational efficiency of our projects.
What can you tell us about your activities as Genux, your joint venture with Glencore launched in 2023?
Genux is a greenfield developer of renewable energy projects in Latin America. At Genux, we have changed the paradigm of how to undertake the development of these projects. We conduct a project with all the compliance issues perfectly tied up from day one, with a negotiated PPA and even advance financing. We buy the land, design the project and obtain the necessary permits, and once it’s ready to be built, we sell it to another party – a typical financial sponsor or a strategic player.
We are always thinking about the end investor, the banks and the equity to make sure these projects are viable. What often happens is that developers find a piece of land and fall in love with the project before they even know it is viable, losing time and money. What we do is take a portfolio approach, looking at several projects, with a set of parameters that have to be met, and if they are not, we move on to other options.
Today, in order to move fast with these projects, we partner with small developers, and we even do tailor-made projects for clients such as Glencore. This means that today Genux has almost 4 GW in its portfolio spanning Mexico, Colombia and soon Peru, with this set to increase to 5.2 GW by the time you publish this interview. No one has ever built up a portfolio as quick as us, and this is on top of the capacity Exus already controls.
What is the nature and capacity of the projects you undertake at Genux and what is your strategy in identifying these opportunities?
In Mexico, our projects are mostly solar, although we have some wind. However, we focus on installing these solar projects only where there is high demand for them. Today, we also have software and systems which help us understand whether a piece of land is viable for a project, considering factors such as the presence of indigenous communities, legal issues, flooding risk and whether it is a naturally protected area.
We also have other software that helps us do the pre-feasibility tests on these projects, a process which normally would take a few weeks, but with our software takes six hours. Finally, we have software called Blue Sky which helps us in the operation and management of our projects.
This technology is vital for us, as due to the size of our portfolio, which includes 20 projects which average about 100 MW of capacity in Mexico, we have to move fast. In addition to this, in Colombia we already have a sizeable portfolio, and we are looking to expand into Chile, Brazil and maybe even Argentina.
What growth plans do you have for Exus and Genux for the next two years?
In two years, Genux should already be selling projects. Let’s say we sell these at USD 80,000-120,000 per megawatt, and a single project is 150 MW in total: that could represent earnings for us of USD 15 million on a single project alone. This potential is why we are looking to grow so fast and are always analysing the portfolio and considering how we can accelerate. Our aim in the next two years is to be present in two more countries, and of course with the formula we employ in these projects, we expect to maintain or even improve their profitability.
In 2023, Exus received an investment of EUR 1 billion, with the plan of transforming itself into a utility company, focusing more on developed markets like Europe and North America. The aim is to focus more on managing our current assets, without discounting any profitable opportunities which may arise. At Exus, the goal is to surpass our competition.
Furthermore, in terms of collaboration between the two entities, the aim is for Exus and Genux to be closely related. Genux would come in for the development part of projects, with Exus then taking on the asset and construction management processes at later stages. Therefore, by default, this collaboration means that Exus will see growth in its asset management portfolio, as we plan to keep many of the projects that Genux develops.
