Sempra Shrinks Buyback Plan to Free Up Cash for Mexico Pipeline

  • Sempra says it’s cutting share buyback target by $500 million
  • Sempra’s Ienova may sell stock to finance Mexico expansions

Sempra Energy says it’s more interested in making money from energy projects in Latin America than buying back shares.

The San Diego, California-based utility owner on Tuesday said it’s scaling back its target for buying shares by $500 million and will instead use the cash to help build a $2 billion natural gas pipeline in Mexico. In fact, its Mexican subsidiary Ienova may sell stock to finance expansions in Mexico. Sempra had previously said it may repurchase as much as $2 billion of its own shares.

Sempra’s lower buyback target underscores how Mexico’s effort to open its oil, gas and power markets to private investors is attracting increasing interest from energy companies in the U.S. and Canada seeking greater growth opportunities abroad. Sempra said in its presentation Tuesday that it’ll spend more than $3 billion in Latin America through 2020, accounting for almost a fifth of its capital program.

Sempra has contracts for $19.5 billion of capital projects over the next five years, and “that’s only what we’re committed to,” Joe Householder, the company’s chief financial officer, said in the call. “We’re going to spend more than that.”

Joint Venture

A joint venture between TransCanada Corp. and Sempra won a $2.16 billion contract with Mexico to build an underwater pipeline that will move more U.S. gas supplies into the country.

Last year, Sempra’s Ienova unit agreed to buy a stake in gas pipeline and storage operator Gasoductos de Chihuahua. On Tuesday, Ienova said it may also bid in auctions that the country is holding to secure renewable energy supplies.

“Our goal would be to have new projects that are accretive and not be doing the buyback if we can get those projects,” Sempra Chief Executive Officer Debra Reed said during the call. “And we sure expect that we will.”

In March, TransCanada said it would sell a stake in its Mexico gas assets. Potential buyers may include private equity, pension or insurance funds, the company said at the time.

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