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KKR Signs on to Fund Mexico Midstream Venture

Mexico's midstream energy sector is attracting more investment as private equity giant KKR and Monterra Energy have formed a joint venture targeting investment in terminaling, storage, pipeline and rail assets for refined products, crude oil and natural gas liquids (NGL).

Natural gas transportation and storage as well as power generation assets could be on the menu as well, the partners said Friday.

Monterra was founded in 2014 by Arturo Vivar and Michael A. Williams to pursue investment opportunities in Mexico's midstream. With offices in Houston, and Mexico City, Monterra staffers have experience in North and South America in the areas of upstream, midstream and oilfield services. KKR is making an equity commitment to Monterra for the development of new projects and acquisition of midstream assets and businesses. Financial terms and details of the partnership were not disclosed.

Monterra intends to own, develop, build and operate midstream infrastructure in Mexico through both greenfield and existing brownfield projects and assets. "Together with KKR and its investment expertise, Monterra will provide a differentiated set of capabilities that can be applied to the development and operation of strategic midstream projects and assets in Mexico," Monterra CEO Vivar said.

According to Tudor, Pickering, Holt and Co., Mexico could attract $50 billion and $13 billion in capital expenditures spending for pipeline infrastructure and power generation, respectively, over the next five years, Monterra said.

"We are very optimistic when it comes to the macroeconomic landscape in Mexico, and we continue to believe the country has significant opportunities -- in energy and beyond -- for long term investment," said Jorge Fergi, KKR head of Brazil and Latin America.

KKR isn't the only private equity that has been drawn to Mexico. In March, BlackRock and First Reserve agreed to take a 45% stake in the phase two segments of Petroleos Mexicanos Los Ramones Pipeline Project. The pipelines to carry U.S. gas to Mexico would be the first major midstream assets built with foreign capital since the recent reform of Mexico's energy sector, the partners said at the time (see Daily GPI, March 27).

After sweeping energy reforms enacted by President Enrique Pena Nieto, the head of Mexico's state-owned electric utility said the country is planning a 75% increase in the total number of miles of its natural gas pipeline network by December 2018 (see Daily GPI, May 1).

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