Hector Torres, Head of Legal Mexico, Central America and the Caribbean, at SunEdison.
SunEdison is an American manufacturer of silicon wafers for the semiconductor industry, and since 2006 the company has also been active in the solar energy market. Since its establishment as Monsanto Electronic Materials Company in 1959, the company has grown to become a major international player in the solar and semiconductor industries, with solar energy headquarters in Belmont, California and offices across the globe.
SunEdison is dedicated to providing innovative, intelligent energy solutions around the globe, and looks to provide its large customer base with uniquely tailored solutions and flexible financing. The company develops, finances, operates and monitors solar energy solutions worldwide, ranging from some of the world’s largest solar deployments to residential customers’ rooftops.
Who’s Who Legal spoke with Hector Torres, SunEdison’s head of legal for Mexico, Central America, and the Caribbean about his role within the company, recent projects the legal team has been working on, developments in the Latin American solar market and the company’s interaction with the private practice sphere.
WWL: Tell us about your role as head of legal at SunEdison.
As head of legal at SunEdison I am responsible for handling all legal matters for the BD, operations and services departments for the Mexico, Central America and the Caribbean region. My responsibilities include: (1) providing legal counselling to the regional top management in regard to ongoing projects as well as the new markets the organisation targets; (2) providing legal advice and supporting the BD and M&A regional teams during the negotiation, drafting/revision, closing and execution of sundry kinds of agreements for the acquisition of photovoltaic projects and opportunities, and the deployment of resources for developing greenfield projects; (3) giving legal advice and support to regional finance and project finance departments during the negotiation, drafting/revision, closing and execution of equity and debt financing for the projects developed or acquired in the region; (4) engaging, supervising and controlling the budget of the of counsel law firms that provide assistance to the organising entities in the region; and (5) in general terms, supervising and coordinating the local legal team and of counsel firms in the region with regard to day-to-day legal, corporate, transactional and regulatory matters.
WWL: Describe a typical day.
A typical morning will be taken up by attending cross-team conference calls and meetings to follow up on the ongoing projects and financing, construction and operational aspects. I devote most of my afternoons to reviewing and drafting emails, as well as to substantial matters that demand my personal involvement, such as contractual negotiations and revisions. Also, on a day-to-day basis I reserve some time for one-to-one calls and meetings with the of counsels, give and take feedback, and plan how to allocate resources over the following weeks in order to cover the service demand in each of the countries I manage.
WWL: Tell us a little more about your participation in top management decision-making.
My role as head of legal for the region requires me to be present at top-level management meetings for all our projects. At SunEdison, the decision-making process is reliant on the legal advice and counselling that in-house and of counsel teams provide. Furthermore, I am responsible for producing the legal notes and responding to sundry queries in support of securing approvals from our investment committees.
WWL: Latin America is a fast-growing market for solar power, with companies from Europe, the US and Asia all looking to establish themselves in this promising market. What legal issues have been raised by the increased competition and what is the company’s strategy for success in Mexico, Brazil, Chile and other attractive regions for solar and renewable energy?
In my opinion, the most critical issues that these developments face in the Latin America region are the low visibility and notorious volatility, and subsequent inability to make accurate projections in regard to the marginal cost of electricity production. The challenge is to properly align lenders by helping them to understand the risks arising from challenging projects. Likewise, a key success factor is the proper drafting of power purchase agreement (PPA) provisions dealing with force majeure (that might directly or indirectly affect the marginal cost of production in countries with a high dependency on a specific source of power, such as hydroelectric), termination events and their consequences (such as payment of any direct/indirect damages including financing breaking costs and return on investment and demobilisation), and sovereign guarantees granted by the local governments as assurance for lenders on the repayment of debt.
WWL: Tell us about any recent special projects your team has been working on. Which laws firms did you hire?
Due to confidentiality restrictions I cannot disclose specific details of our projects, but I can tell you that: (1) in Mexico we acquired a portfolio of 90 MW to be financed and constructed this year under the Pequeño Productor scheme (small-scale production purchased by the national utility) and in 2014 we are undertaking greenfield development with our own resources; (2) in Central America we have closed preliminary arrangements (on an M&A transaction) for acquiring a portfolio of up to 100 MW, fully permitted, and are also seeking to participate in some public tenders for the award of PPAs with 600 MW of installed capacity; and (3) in the Caribbean we have identified potential opportunities (including participation in a public tender in Jamaica) but we are still not fully focused on the Caribbean countries.
With regard to the law firms we use, in Mexico we have Baker & McKenzie, Greenberg Traurig, Ritch Mueller and Sánchez DeVanny Eseverry, and in Central America we use Lexincorp and Arias & Muñoz.
WWL: What criteria do you use when deciding which firms/lawyers to instruct in relation to an energy legal issue?
My choice depends on the specific experience the firm members have in electricity-related and, in general, infrastructure and financing matters.
WWL: Describe the process that led to your selection as general counsel.
The process was quite standard, at least in my opinion. I was first contacted by a talent recruiter and had a couple of interviews. Afterwards the recruiters arranged for a physical meeting with the regional manager and finally I had long conference calls with the former Latin America and Middle East, Turkey & Africa (META)general counsels. Prior to the last two conference calls with the legal team I was asked to fill out a comprehensive experience datasheet covering the main topics of interest for SunEdison, including the size of the transactions and level of involvement in EPC, financing and development from my past positions.
WWL: What is the greatest challenge – legal, practical or political – facing the renewables industry in Mexico?
Today, the lack of transparency on how the national utility and the Ministry of Finance determine the marginal cost of production, the lack of a legal and regulatory framework that distinguishes between different kinds of renewable sources, and, most recently, the impasse caused by the energy bill of amendments that the federal government is putting together and that will be filed to the Federal Congress.
WWL: How would you describe the policies of domestic governments across Latin America in developing infrastructure for new solar and renewable energy, and what developments do you predict for the industry in the next five years?
At least in the region for which I am responsible, laws and regulations appear to be written to support renewables. Most of these regulations are recent and recognise renewables as strong and mature. Some regulations grant tax incentives to renewable projects and developers, which is an important differentiator when running financial modelling for the projects. My prediction for the industry in the next five years is that renewables will earn more and more recognition in the off-takers market. In addition, national utilities will be restructured from the foundations to be much more agile and limited in scope to act as administrators or managers of public transmission grids and dispatch control. Spot markets for energy will likely be seen as a standard in most Latin American countries within the next five years. Finally, PPAs will become an extremely simple contractual arrangement, meaning that the PPA as we know it (over 50 pages) will be definitely limited to a simple purchase offer or similar mercantile standardised document.
WWL: What are your relationships with the CEO, other members of the executive leadership and the board at SunEdison?
At my level I do not have a direct relationship with SunEdison’s CEO. My direct relationship is with the regional management and one level above. My direct report is to the META and Latin America general counsel and my functional report at that level is with the president of the same META and Latin America regions. At the same level of the latter, I also have interactions with the CFO and COO for the META and Latin America region. Essentially, my direct relationship and reporting is with the individuals at the second level of top management at SunEdison globally.