For the last couple of years the Mexican government has been pushing to start the so called Mexican Electric Market, slowly the market is coming into place; there have been two electric auctions to win contracts.
But, what are the real and now opportunities to invest in Mexico?
I have three layers of investors that can play in this market and the new opportunities that are arising, from SMEs to large international corporations every investor can play in this market and here's is how.
Large companies have already been in Mexico for a long time, nevertheless, now instead of supplying energy or services to CFE or PEMEX; it will go directly to the customer.
So here are the opportunities for large companies: Play in the Mexican Market, Use Mexico as platform to export energy to the neighboring such as Baja California already does, Invest in Chemical Plants to supply oil derived products, Mergers and acquisitions of Mexican gas stations, natural gas suppliers, Renewable Energy Credits to sell in the Energy Market.
Much can be said of the new opportunities; nevertheless an honest point of view would be to instead of establishing a new company, it would be better to purchase companies already operational. There are more opportunities to invest in several SMEs and independent gas stations, LP Gas Suppliers, Engineering and service firms than to invest in a new venture without clients and without any operations.
For SMEs there are also opportunities, the thing is that as small investors are cautious I suggest also investing in what I would call the Tier 3 which are small cap investments such as gas stations, solar tech, MEM scheduling desk, energy projects, engineering, LP and natural gas supply.
Mexico is a virgin soil for energy companies, and the earlier companies start their footprint in this country the better for their interests. Another thing is that I personally suggest moving from north to center Mexico.
Why do I suggest moving north to south?
The northern region of Mexico, specifically Baja California has been integrated to the CAISO and IID which are the border utility companies; Baja California is part of the WECC which is the western energy coordinating council. Baja California holds the experience in which the whole Mexican Energy Market has been benchmarking with the CAISO and ERCOT, so the logic and normal step for companies to start investing would be in the northern region for SMEs; for extraction and operations of Oil and Nat Gas companies would have to go to the Mexican Gulf and to Coahuila to establish there.
Mexico City may be the capital, but is as much important in energy as DC is for the United States, its holds no important reason to establish there rather than lobbying.
My ultimate headquarters city to establish in Mexico as an energy company would be in order of importance being an industrial and also a place of interest to the energy market is Monterrey, Campeche, Mexicali, Hermosillo, Saltillo and Chihuahua.
Monterrey as the industrial capital of Mexico and near the natural gas deposits in the Burgos Shale so as Saltillo, either of those cities would represent an strategic point to an energy company.
Campeche as the center of the largest of extraction sites in Mexico in the Gulf of Mexico.
Mexicali as an industrial hub and leader of the Maquila Model Industry, leader to create border partnerships in terms of importing and exporting energy and natural gas. Baja California has an LNG port in Ensenada and the natural gas pipelines are linked with those in California and Arizona, the Baja Norte pipeline and a leader in wind energy, solar energy and the largest geothermal power station in Mexico and one of the largest in the world; so as you can see, it make sense.
Hermosillo in the state of Sonora and Chihuahua as Border States are linked to the largest interlinked electric system of Mexico which it is called the Mexican Interlinked System; only the Baja California Peninsula has two independent systems as it is the farthest and less populated region of Mexico.
Having a strategy is vital, and the Mexican Energy Market is the pathway not only to a proper continent, it holds many interests around the globe and with the system of pipelines of North America, Canada and the United States can supply energy to Mexico and vice versa, we are now open.
Would you be part of the market?
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.