IEnova-TransCanada JV bids for US$3bn Mexico subsea pipeline

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Friday, May 20, 2016

Infraestructura Marina del Golfo (IMG), a JV between Mexican firm IEnova and TransCanada, submitted a bid to build and operate a subsea pipeline.

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The Sur de Texas-Tuxpan natural gas pipeline – expected to require US$3.1bn and become operational by the end of 2018 – has been put out to tender by Mexico's federal electricity company CFE.

TransCanada has a 60% stake in IMG and IEnova, the Mexican unit of US firm Sempra Energy, has a 40% stake.

"The JV brings together two of the most relevant players in the market," lender Credit Suisse said in a research report.

"We believe this new partnership reflects a good understanding between the two players, which in our view, could lead to additional opportunities for IEnova," it added.

Credit Suisse said the JV bid is positive given that IEnova's partnership with a top operator "positions it well for the bid."

"Under our base case, equity contribution from IEnova to the JV would be of US$237mn, which could be leveraged with its available credit line (US$509mn) without breaching its covenants," the bank said. "We estimate its net debt-to-Ebitda would reach 2.7x by 2017 with the new debt."

The proposed 800km subsea pipeline would bring natural gas from Texas to CFE power stations in the states of Tamaulipas and Veracruz. The pipeline would also connect to the Nueces-Brownsville and Tuxpan-Tula pipelines.

CFE plans to award the contract in June. The winning bidder will be responsible for land and permit procurement, financing, engineering, construction, operation and maintenance.