TC Energy strikes deal with Mexico’s CFE to develop $4.5b gas pipeline

Leading North American energy company TC Energy (TSX: TRP) has announced it has struck a deal with Mexico’s state-owned electric utility Comisión Federal de Electricidad (CFE) to develop a US$4.5 billion (C$5.79 billion) natural gas pipeline.

The offshore Southeast Gateway Pipeline will supply natural gas to Mexico’s central and southeast regions, and is expected to benefit millions of people through greater access to clean and reliable energy.

TC Energy prides its brand on continuing to look for ways to develop solutions to move, generate and store the energy North America depends on in more sustainable means.

The project is anticipated to be a 1.3 billion cubic feet per day, 715-kilometre offshore natural gas pipeline.

TC Energy confirmed pipeline developments would expand its secured capital program to $33 billion and could strengthen its 2021-2026 adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) growth outlook.

First-of-its-kind strategic partnership

In accelerating the development of natural gas infrastructure within the regions of Mexico, TC Energy has entered into what it deems is a “first-of-its-kind strategic partnership” within CFE’s 85-year history.

TC Energy President and chief executive officer François Poirier said the company is grateful for the opportunity to be a part of this partnership with CFE.

“This alliance capitalises on each of our strengths. Together, TC Energy and the CFE will develop critical energy infrastructure to serve the growing central and southeast regions of Mexico,” he said.

“The Southeast Gateway Pipeline will be TC Energy’s second marine natural gas pipeline in Mexico, connecting to the coastal regions of Veracruz and Tabasco, and is another prime example of our ability to originate world-class projects that offer incremental growth to our long-term outlook.”

Both parties have agreed to consolidate previous Transition Services Agreements (TSAs) executed between TC’s subsidiary TGNH and the CFE in connection with its natural gas pipeline assets in central Mexico with a contract which extends through to 2055.

The new TSA will also overlook new infrastructure projects considered in conjunction with CFE.

Industry-leading capital program

In addition to increasing TC Energy’s secured capital program to $33 billion, the development of the US$4.5 billion Southeast Gateway Pipeline project fulfils the company’s goal of sanctioning roughly $5 billion per annum of high-quality energy infrastructure projects.