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Sempra Energy (SRE) Unit Buys PEMEX's 50% Interest in JV


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Sempra Energy’s (SRE - Analyst Report) Mexican unit, Infraestructura Energética Nova, S.A.B. de C.V. (“IEnova”) closed the takeover of Petróleos Mexicanos (PEMEX) Transformación Industrial’s 50% equity interest in Gasoductos de Chihuahua.

Gasoductos de Chihuahua was a 50/50 joint venture (JV) between IEnova and PEMEX. It builds and operates the energy infrastructure in Mexico.

Details of the Transaction

The purchase consideration for the transaction is approximately $1.14 billion. After the acquisition, IEnova will own 100% of the Gasoductos de Chihuahua. However, IEnova and PEMEX will continue to own a 50% stake each in the holding company of the Los Ramones Norte pipeline project, Ductos y Energéticosdel Norte.

The assets covered by the latest transaction include three natural gas pipelines, an ethane pipeline, and a liquid petroleum gas pipeline and related storage terminal.

The Original Agreement & its Modifications

In Jul 2015, IEnova had agreed to purchase PEMEX’s 50% equity interest in the IEnova-PEMEX joint venture. Last week, IEnova finally received an approval from the country’s anti-trust commission for the acquisition. (Read more: Sempra IEnova Gets Nod for Acquiring PEMEX's Stake in JV)

IEnova was previously in negotiations with PEMEX for making changes in the original agreement on Mexico's Competition Commission request to competitively auction the two assets covered by the original transaction. In Jul 2016, an open bidding process was held but no bidders participated. As a result, the transaction was restructured.

About IEnova

IEnova specializes in developing, building and operating the energy infrastructure in Mexico. Its lines of business comprise the entire energy infrastructure value chain that is open to private investment. IEnova is one of the largest private energy companies in the country and the first private energy company to be listed in the Mexican Stock Exchange.

IEnova’s Pipeline

IEnova is expected to be one of the major growth drivers at Sempra Energy over the next few years. In Jun 2016, its joint venture with a subsidiary of TransCanada Corporation won a contract to build, own and operate the Sur de Texas – Tuxpan natural gas pipeline by the Federal Electricity Commission (CFE). The project is expected to be complete in late 2018 and has a 25-year natural gas transportation service contract with the CFE.

In May 2016, IEnova entered into a 21-year natural gas transportation services agreement with the CFE for 100% of the transport capacity of the Empalme Lateral pipeline. IEnova will develop, construct and operate the 12-mile pipeline. The pipeline, whose estimated cost is $12 million, is expected to begin operations in the first half of 2017.

Zacks Rank & Key Picks

Sempra Energy currently has a Zacks Rank #3 (Hold). A few better-ranked stocks in the same industry include Clean Energy Fuels Corp. (CLNE - Snapshot Report) , ONE Gas, Inc. (OGS - Snapshot Report) and Northwest Natural Gas Company (NWN - Snapshot Report) .

Clean Energy Fuels’ shares witnessed a 1.0% gain in the last five days’ trading session. On an average, the company has delivered a positive earnings surprise of 219.57% in the trailing four quarters. Clean Energy Fuels sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

ONE Gas carries a Zacks Rank #2 (Buy). The stock gained 1.8% during the last one-month period. On an average, the company has delivered a positive earnings surprise of 7.80% in the trailing four quarters.

Northwest Natural Gas, a Zacks Rank #2 stock, has seen its shares inch up 0.1% during the last trading session. On an average, the company has delivered a positive earnings surprise of 9.15% in the past four quarters.

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