Almost a year after Mexico opened its energy market to private investors, North American firms are rushing south to decide which pipeline or power plant to invest in.
Enthusiasm is so high that some executives from big asset managers, pension funds and private equity firms complain of overbooked hotels in certain parts of Mexico City and business-class airplane cabins crowded with pitchbook-reading competitors.
So far, the potential investors are mainly looking, not buying, with actual investments in Mexican energy projects coming in more slowly than some expected. The Mexican Energy Ministry has predicted $62.5 billion in both public and private investments over three years from the new program, which was signed into law last August.
Since then, only five private equity deals worth a total of $2 billion have been announced, according to Pitchbook, a Seattle-based research firm.
Though the money tap could eventually open, given the promise afforded by Mexican natural gas, oil and renewable energy projects, some of the reluctance to ink deals may be laid to the peculiar risks of doing infrastructure-related business in Mexico.
Government bureaucracy, crime, challenging property rules and local opposition have delayed some projects and raised their costs, investors told Reuters.
“There is a lot of interest but I agree there have not been that many actual deals announced,” said Alfredo Alvarez, a partner for Ernst & Young, which advises investors on Mexico energy infrastructure deals in Mexico City. “They are coming.”
Mexican government and regulatory agencies are still writing the rules and staffing to handle the reform, Alvarez said.
Once the tender offers begin for oil exploration projects, which typically require more than $1 billion, the total value of deals will jump dramatically, he said.
Mexico’s state-owned oil behemoth Petróleos Mexicanos commonly known as Pemex expects total investment of $76.4 billion in exploration and production as a result of the reform, a spokesperson said.
By BY JESSICA TOONKEL AND CHRISTINE MURRAY
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