BlackRock, First Reserve Invest in PEMEX Pipelines

By Brad Kramer March 30, 2015 View Profile

Two U.S. investment firms are marking the first foreign investment in Mexico’s state-owned midstream assets since the country’s historic Constitutional Energy Reform in 2013.

BlackRock and First Reserve have entered into a definitive agreement with P.M.I., a wholly owned subsidiary of Petroleos Mexicanos (PEMEX), to acquire approximately 45 percent equity interest in two natural gas pipelines, Los Ramones Phase II North and Los Ramones Phase II South, according to a March 26 statement. Upon closing, these will be the first major PEMEX-sponsored midstream assets to be built in partnership with foreign capital since the approval of Mexico’s energy reforms.

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The Los Ramones II projects consist of the construction and operation of 744-km of natural gas pipelines that will serve as critical energy infrastructure and are part of a broader initiative to transport abundant, natural gas from the Eagle Ford shale in South Texas to meet Central Mexico’s growing demand for natural gas.

Construction of the projects began in 2014, with full commercial operations expected in mid-2016.

This transaction represents the first infrastructure investment for BlackRock in Mexico. BlackRock intends to establish a local infrastructure investment platform in country, leveraging its global infrastructure investing capabilities and its existing Latin American business. BlackRock Infrastructure currently manages more than $6 billion of invested and committed assets globally.

The investment will expand First Reserve’s existing Mexican infrastructure investment footprint. First Reserve is the largest global private equity and infrastructure investment firm exclusively focused on energy with more than $4 billion dedicated to energy infrastructure opportunities worldwide.

PEMEX CEO Emilio Lozoya noted that the investment by BlackRock and First Reserve helps Mexico’s Energy Reform take step closer to becoming an economic driver for the country. He also mentioned that this project shows that international investors have confidence that the changes propelled by President Enrique Pena Nieto are delivering benefits to the Mexican people.

“Private sector participation in infrastructure is going to be crucial in Mexico and around the globe,” said Jim Barry, global head of BlackRock Infrastructure Investment Group. “The opportunity for infrastructure in Mexico given recent reforms, positive demographics and economic stability and resilience in Mexico has definitely drawn our attention and we look forward to exploring other opportunities in the near future.”

First Reserve chairman and co-CEO William Macaulay said the company is “supportive of the Mexican government’s focus on energy reforms” and that the Los Ramones projects “will be a cornerstone to these efforts.”

Both Projects will benefit from a 25-year take-or-pay Transport Services Agreement (TSA) with PEMEX Gas y Petroquímica Básica (PGPB). Transaction closing is contingent upon required anti-trust and other regulatory approvals.

BNP Paribas and Santander acted as advisors to the syndicate of banks providing project finance to Los Ramones Phase II South. Santander also acted as underwriter for debt financing of 80 percent of construction costs in Los Ramones Phase II North.