The first international portfolio holding outside Australia and Canada, Infraestructura Energetica Nova (Mexico City: IENOVA, OTC: IENVF) offers exposure to perhaps the most lucrative infrastructure investment opportunity since the shale revolution’s early days.
Mexico’s growing appetite for inexpensive US natural gas provides a welcome release valve for the prolific shale plays north of the border.
Exports of US natural gas to Mexico exceeded the volumes piped to Canada for the first time in 2015, reflecting a 44 percent upsurge in shipments south of the border. This trend has continued in 2016, with US pipeline exports of natural gas growing by 32 percent year over year.
All signs point to US exports of natural gas to Mexico growing significantly in coming years.
Mexico’s gas output has hovered around 5.5 billion cubic feet per day since 2009, while consumption has increased to 8 billion cubic feet per day.
With the country’s major oil and gas fields aging and production in decline, the government had expected to rely on imports of liquefied natural gas (LNG) to meet demand and had built three regasification facilities to accommodate this trade: Altamira on the east coast (2006) and Ensenada (2008) and Manzanillo (2012) on the west coast.
The shale gas revolution north of the border has prompted Mexico to pursue less expensive pipeline imports; today, the country’s regasification terminals operate at a fraction of their nameplate capacity.
Mexico’s state-owned power company also plans to more than double its generation capacity over the next 14 years, with gas-fired power plants accounting for the bulk of these capacity additions. Including growing demand from Mexico’s all-important manufacturing industries, the Ministry of Energy expects natural-gas consumption to increase at a compound annual rate of 3.4 percent through 2028.
Infraestructura Energetica Nova owns a portfolio of gas pipelines, power transmission lines and renewable-energy capacity in Mexico. Sempra Energy (NYSE: SRE), the parent of San Diego Gas & Electric, holds 61 percent of the Mexico-based company and has a long history of successful operations in Latin America.
The stock sold off after Donald Trump’s victory in the presidential election, reflecting his rhetoric about building a wall between the two countries and protective tariffs.
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Elliott and Roger on Sep. 30, 2020
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