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Expanding in Mexico, Sempra subsidiary to build 'milestone' solar farm

Sempra Energy subsidiary Infraestructura Energetica Nova S.A.B. de C.V., or IEnova, will finance, build and operate a 110-MW solar project in Sonora, Mexico, and sell the output to steel producer DeAcero under a 20-year power purchase agreement, the companies have announced. The deal is the country's "first clean energy supply contract between a private generator and an industrial group" under energy reforms introduced by Mexican President Enrique Peña Nieto, according to the March 27 statement.

"The execution of this contract between two private companies is another milestone reached in the implementation process of new mechanisms that promote energy reform," Pedro Joaquín Coldwell, Mexico's secretary of energy, said in the statement.

A key component of Mexico's sweeping energy reforms is the creation of new competition for decades-old power monopoly Comisión Federal de Electricidad, or CFE. Mexico's "energy transition law," enacted at the end of 2015, set targets of obtaining 25% of the country's energy from renewable sources by 2018, and 35% by 2024. Combined, the reforms have generated new demand for renewables that IEnova is tapping.

IEnova's $115 million Pima Solar project is scheduled for completion in the fourth quarter of 2018, adding to its growing fleet of wind and solar farms. "Pima Solar will be our first solar project in operation in Mexico," IENova CEO Carlos Ruiz Sacristán said. When the project begins operation, the company will have more than 500 MW of renewable energy generation in operation and an additional 141 MW under construction, he added.

IEnova's 155-MW Energía Sierra Juárez wind farm in the state of Baja California, a joint venture with Massachusetts-based developer InterGen, went online in 2015 and sends all its power across the border to San Diego Gas & Electric Co., another Sempra Energy subsidiary. The pre-reform project is the only one of IENova's renewable energy facilities sending electricity to the United States, said Sue Bradham, director of investor relations for the publicly listed company, whose shares are traded on Mexico's stock exchange. Among its post-reform projects are the 252-MW Ventika wind farm in the state of Nuevo León, which it acquired last year and completed in December. IEnova also is developing two solar farms contracted last year to sell power to CFE under long-term agreements. The 41-MW Rumorosa Solar project in Baja California and the 100-MW Tepezalá Solar facility in Aguascalientes are scheduled to begin operating in 2019.

In a recent earnings call, Sempra Energy executives discussed what they view as excellent prospects for energy development in Mexico. "We see amazing growth opportunities in Mexico," said CEO Debra Reed, citing renewables, electric transmission, pipelines and receiving terminals as opportunities. Pointing to the Trump administration's focus on the U.S. trade imbalance, Reed said, "IEnova's business supports this by helping build the backbone of Mexico's energy infrastructure." Sempra will further outline its activities in Mexico at its April 5 analyst event, she added.

To fuel its current expansion, IEnova reeled in roughly $1.4 billion in net proceeds from private and public placements in October 2016, including a $350.7 million investment from Sempra Energy.