Sempra (SRE) Unit Buys Mexico Pipeline Interest For $520M
Zacks Investment Research | Oct 09, 2017 08:38AM ET
Sempra Energy (NYSE:SRE) announced that its subsidiary, Infraestructura Energética Nova, S.A.B. de C.V. (IEnova), has acquired Pemex Transformación Industrial's (Pemex) participation in Ductos y Energeticos del Norte. Thanks to this acquisition, IEnova’s share in the Los Ramones II Norte pipeline will increase to 50% from 25%.
Deal Details
Los Ramones II Norte connects the Los Ramones I pipeline and the Los Ramones II Sur pipeline in central Mexico. IEnova acquired Pemex’s share in this pipeline for $231 million and also assumed Pemex’s debt in it of $289 million.
This 452 km 42-inch diameter Los Ramones II Norte pipeline commenced operations in February 2016. It transports natural gas from Nuevo Leon to San Luis Potosí. This pipeline has the ability to transport 1.42 billion cubic feet day (Bcf/d) and has two compressor stations.
This acquisition is expected to close in the fourth quarter of 2017, once all the necessary approvals are received from the concerned authorities.
Mexico’s Demand for Natural Gas
Mexico has been registering an increase in demand for natural gas, primarily due to its electricity and industrial sector. Per a report from FTI Consulting, Mexico’s natural gas demand will grow to 9.2 Bcf/d or 22% above 2015 levels by 2030 and imports will rise 53% to 5.4 Bcf/d.
In excess of 50% of the natural gas demand in Mexico will be met through imports and the natural gas producers of United States will play a key role. The natural gas pipelines will play a crucial role to transport this much needed volume of natural gas to Mexico from the United States.
Our View
Given the current capacity of Los Ramones II Norte Pipeline, it nearly accounts for nearly 19% of the total natural gas transported in Mexico. No doubts, increasing stake in such a pipeline will boost the profitability of Sempra Energy.
Zacks Rank & Stocks to Consider
Sempra Energy currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry worth considering are Clean Energy Fuels Corp. (NASDAQ:CLNE) , Just Energy Group, Inc. (TO:JE) and Spire Inc. (NYSE:SR) . All stocks carry a Zacks Rank#2 (Buy). You can see Original post
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