Sempra's Ienova Equity Sale Vote to Decide Path as Shares Slide

  • Ienova shareholders to vote Sept. 14 on extra equity sale
  • Ienova stock has tumbled 22% since reaching high on April 28

The revival of Infraestructura Energetica Nova SAB, Mexico’s only publicly traded energy company, is in the hands of its shareholders.

Investors in Sempra Energy’s Mexico unit will vote Sept. 14 on an equity sale that will decide the company’s financial strategy following its $1.3 billion acquisition of a pipeline stake. Approval of the sale, which is likely, could help revitalize the stock, which has fallen 22 percent since April after averaging a 47 percent return in its first two years on the Mexican Stock Exchange, according to Gerardo Cevallos, a Vector Casa de Bolsa analyst in Mexico City.

The company known as Ienova, whose stock climbed as high as 92 pesos on April 28, has tumbled 8 percent this quarter as electricity and natural gas prices have fallen, said Alik Garcia, an analyst at Intercam Casa de Bolsa SA. The share sale would help Ienova pay for the July 31 pipeline stake purchase and allow the company to keep debt at a comfortable level, Garcia said, who also expects the board to approve the issuance.

“The approval of the share sale will be important to keep the company’s level of debt under control,” Garcia said in a phone interview from Mexico City. “If the company were to finance the acquisition with a debt offering, the short-term leverage levels would shoot up, which is something the company, and the shareholders, don’t want.”

Pipeline Auction

Ienova, Mexico’s only publicly traded energy company, had a 1.3 ratio for net debt-to-earnings before interest, taxes, depreciation and amortization, or Ebitda, at the end of the second quarter, according to Garcia.

“While we cannot reveal the details of our financial plans, we hope to finance our investments with a combination of debt and capital in the amounts that allow us to maintain our current AAA credit rating,” the company said in an e-mailed response to questions.

On Sept. 11, Ienova will bid $898 million for the rights to build and operate a 385-mile pipeline located just south of the U.S.-Mexico border, according to financial terms disclosed by the Commision Federal de Electricidad. Ienova’s bid is the third lowest, following a bid of $570.6 million by billionaire Carlos Slim’s Grupo Carso SAB and a $685.6 million proposal by Fisterra Energy Mexico IX and Operadora Mexicana de Gasoductos.

Increasing Competition

Failure to win the pipeline project “will feed market concerns about the rising competitive environment in Mexico’s natural gas pipelines sector, thus affecting Ienova’s shares in the short-term,” Vanessa Quiroga, a Credit Suisse Group AG analyst, said in a Sept. 7 research note.

If the new equity sale is approved, Ienova will probably wait until market conditions improve, as have other Mexican companies this year, before selling shares, Garcia said.

“The Mexican market is volatile,” Garcia said. “If Ienova doesn’t see ideal conditions for the offering, they could delay it for a later date.”

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