Investors have a
new reason to consider a stake in Mexico’s natural gas distributor Infraestructura Energetica Nova
(IENOVA: MX). In early September 2016, IEnova agreed to buy
the Ventika Wind farm for 16.1 billion pesos (US$850 million). The project was originated by a partnership
between Cemex and Blackstone’s subsidiary, Fisterra Energy. Ventika is composed of two sets of wind
turbines standing about thirty-four miles south of the U.S.-Mexico border.
The project is a
first for Mexico on several levels. With
eight four wind turbines capable of generating up to 252 megawatts of
electricity, it is by far the largest wind energy project in Latin
America. Ventika wind farm was designed
and constructed by ACCIONA Energia using the Nordex/ACCIONA turbine
technology. Each turbine has the
capacity to produce three megawatts. Unlike
most wind towers made from metal alloys, the Ventika towers were each composed
of twenty-two concrete sections that were manufactured and assembled in a
central plant.
Ventika’s
developers secured off-take agreements for the project’s electricity
output. Some of the power will go to one
of the original partners, Cemex, for one of its production facilities. FCA Mexico, a subsidiary of Fiat Chrysler
Automobiles, FEMSA, DEACERO and Technologico de Monterrey will also receive
power.
With the heavy
lifting has been completed - adequate financing, construction and commissioning,
and securing sufficient customer demand
- IEnova can simply clip
coupons. Risks in the Mexico energy
company have been confined to the natural gas market. Adding wind energy to the mix helps diversify
revenue and income streams and puts the company in elevated competitive
position in Mexico’s energy industry.
The 2013 energy
reform measures in Mexico opened the door to smaller companies like IEnova, as
Pemex lost its monopoly over oil and gas distribution in the country. IEnova has also benefitted from the fall in
oil prices as Pemex has been forced to sell some of its assets to make up for
lost cash flows. IEnova is buying out
50% of Pemex’s stake in the pipeline operation of Gasoductos de Chihuahua.
To help pay for
the Gasoductos and Ventika deals, IEnova is planning a public offering in
October 2016, to raise as much as 18.9 billion pesos (US$1.0 billion) in new
capital. The stock is trading at 39.35
times trailing twelve months earnings.
The company has paid a dividend in the past, but does not have a
consistent quarterly dividend. The
offering circular should provide an interesting view on how management plans to
take advantage of the shifting sands in the energy market in Mexico.
IEnova is the
first publicly traded energy infrastructure company in Mexico. For those investors who are not keen on a
stake in a foreign listed company there is an alternative. IEnova is a majority-owned
subsidiary of Sempra Energy, which is a California-based company listed on the
New York Stock Exchange under the symbol SRE.
No small-cap, Sempra boasts a market capitalization of $26.8
billion. The stock trades at 28.3 times
trailing earnings and offers a dividend yield of 2.8% at the current price level. Analysts following Sempra have estimated
potential growth near 7.5% in the next five years, well above GDP growth
rates. That is a good reason to shout olé!
Neither the author of the Small Cap Strategist web
log, Crystal Equity Research nor its affiliates have a beneficial interest in
the companies mentioned herein.
No comments:
Post a Comment