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Sempra’s IEnova Unit Accelerating Mexican Growth Engine in Liquids, Midstream

Building Mexico energy infrastructure ranging from refined products to renewables is what Sempra Energy views as its sweet spot for growth through its majority (66%) ownership of Infraestructure Energetica Nova, SAB de CV (IEnova), executives said Tuesday at an analyst meeting in New York City.

Dangling the prospects for double-digit annual growth rates, Sempra CFO Jeffrey Martin and IEnova CEO Carlos Ruiz Sacristan emphasized that IEnova has a track record and a strategy to maintain and increase growth rates by diversifying assets and customers to the refined products, renewable and electric transmission sectors.

Ruiz Sacristan and IEnova’s Tania Ortiz Mena, chief development officer, said mergers and acquisitions (M&A) also will be part of the growth in potentially $45 billion of opportunities through 2025 and including natural gas.

Opportunities across multiple sectors through 2025 break down into $10 billion in natural gas, $10 billion in liquids gathering/processing infrastructure, and up to $25 billion in power sector projects, both renewables and transmission, Ortiz Mena said.

Exploration & production auctions in Mexico offer the potential to grow the midstream sector in the country via the gathering and processing segment.

IEnova plans to pick off some of the best of its opportunities to add to its existing $5 billion in 25 Mexican projects completed and under development. Ruiz Sacristan early this year said IEnova had eight projects worth $800 million on its plate.

Among other things, IEnova is a 40% partner with TransCanada Corp. (60%) in the undersea Sur de Texas-Tuxpan pipeline to carry natural gas from the United States to Mexico; inservice is expected in a year. The pipeline’s 2.6 Bcf/d capacity is equivalent to about 40% of Mexico’s 2016 gas demand.

Noting that he is confident IEnova can maintain a high rate of growth  of 9-11% annually, Ruiz Sacristan said Mexico is loaded with "opportunities that can provide attractive returns," citing the company's track record of more than two dozen projects over the past 20 years," going back to its early gas distribution systems installed in medium-sized population centers in the initial days of San Diego-based Sempra.

Going forward, IEnova will be increasingly doing business with more private companies and Mexico’s government-run energy outlets, Petroleos Mexicanos (Pemex) and Comision Federal de Electricidad (CFE). While the competition is likely to increase as the Mexican government allows more private-sector companies to be involved, "there are plenty of new alternatives and opportunities for us," he said.

IEnova's strategic plan is focused on liquids, natural gas and the power sector. "We definitely want to be a key participate in the midstream sector," Ruiz Sacristan said.

"The Mexican market is evolving very quickly and providing us with a wide variety of options that will allow us to continue to grow and diversify our business," said Ortiz Mena. "We will not only diversify our asset base, but also our customer base.," maintaining its position in natural gas infrastructure and adding other sectors.

Ortiz Mena noted that developments are unfolding "very quickly in the midstream space, and we believe we are very well positioned to capture these opportunities." She said some of the liquids marine terminals IEnova is involved in represent projects valued at $100-200 million, and each may be connected to an inland terminal, each of which is another project up to $200 million in value.

"We're actively in discussions with about 10 prospective customers for different projects throughout Mexico, including refiners, integrated oil companies, and global traders," she said.

In all of the targeted sectors, M&A will play an "important part" in IEnova's growth strategy, said Nelly Molina, vice president for finance.

Since 2010, about one-third of the company's growth has come from acquisitions, Molina said.

IEnova is looking to bring in resources and companies that can be used to leverage even further growth, Molina noted.

"Today, we are known as a key and serious player in Mexico because of our previous acquisitions, our success in the clean energy auction [by the government], our active participation in all of the government's bids, and our reputation for execution of construction projects."

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