Reference no: EM133157052

CHAPTER DISCUSSION

1. Surf the Internet and perform the following:

a. Describe the physical or natural environment surrounding companies located in Luzon, Visayas, and Mindanao.

b. Identify the programs and regulations adopted by the European Union, United States, and ASEAN to reduce carbon dioxide and other greenhouse gases.

c. Explain how different countries invest in sustainable energy, including wind, solar, and water power, to support advocacies on environmental sustainability.

2. Mini-Case. Read the mini-case of Walmart de México and answer the discussion questions comprehensively

Walmart de México

When Walmart de México y Centroamérica decided to buy the power generated by Electrica del Valle de México's (EVM) wind farm, EVM's struggling project received a significant boost. While the proposed wind farm was located in an area with abundant wind resources, absent a creditworthy offtaker, the project would not have been able to line up financing. With Walmart de Mexico's 15-year PPA (Power Purchase Agreement) in hand, the developers were able to gain financial backing, buy and erect the turbines, and begin generating electricity by 2010.

For Walmart de México, becoming the wind farm's offtaker accomplished a number of important objectives. EVM guaranteed electricity rates below those charged by Mexico's state-controlled utility, shaving costs for the famously thrifty retailer. In addition, the project allowed Walmart de México to get closer to some of its sustainability goals. The wind farm would supply electricity to 348 Walmart de México facilities in Central Mexico, providing 18% of the electricity Walmart de México consumed in 2010.

The wind farm was just one part of the efforts Walmart de México was undertaking In the sustainability area. The company had pledged to meet ambitious goals, looking to reduce waste in its and its suppliers' operations. In the energy area, the company was hoping to receive 50% of its energy from renewable sources by 2015, even in a period of rapid growth, increasing its square footage in Mexico by 12% in 2012 alone. All told, the efforts of Walmart de México had made it the world's leading retailer in the area of sustainability-a distinction the company hoped to build on.

The success of the EVM wind farm had ignited Manuel Gómez Peña's thinking about further renewable energy projects. Gómez, Walmart de México's director of sustainability, was considering ways the project financing structure might be further adopted to allow Walmart de México to participate in and benefit from other projects. Gómez was also considering the mix of renewable energy sources. In addition to wind, solar and mini hydroelectric projects were possibilities that Walmart de México could consider.

Any project that Walmart de México undertook had to work in concert with Mexico's electricity grid and rate-making structure. Mexico's political leadership had announced a commitment to electricity from renewable energy sources; to move the country away from its traditional reliance on natural gas and oil. Mexico's government controlled electricity utility had simplified the transmission rates for renewable energy and had constructed a few projects of its own. However, there were no special feed in tariffs for renewable energy and only a few tax incentives for the construction of renewable energy projects. Furthermore, there was a dearth of independent project developers with the resources and expertise to build large-scale projects.

Gómez also had to take into account Walmart de México's capabilities and focus. While the company had made sustainability a priority, corporate officials were loath to take on projects that took them too far from the company's central activity of retailing, The company's investment group analyzed sustainability projects on the same basis as any other project-concentrating on the return on investment. Gómez believed that the situation called for creative thinking.

Discussion Questions

1. How can the company leverage its sterling credit rating to get renewable energy Projects off the ground?

2. For the EVM wind farm, Walmart de México's equity investment was minimal and just sufficient to meet the requirements for Mexico's self-supplied tariff. Should the company take a larger equity position in furthering energy projects rather than simply serving as an offtaker?

3. What technologies should Walmart de México employ to achieve its renewable energy goals?

4. Should the company hold a portfolio of projects or just concentrate on one Technology?

5. How could Walmart de México expand the program to other Central American countries where it operates?

6. Is there a way to include suppliers into a renewable energy program?