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IEnova confident of obtaining key Mexican LNG import permit in 2020

Highlights

IEnova says working closely with authorities

Permit to be granted for 20 years

No major issues raised by authorities

Mexico City — IEnova, the Mexican unit of California-based utility Sempra Energy, is confident it will secure a key government permit this year to make a final investment decision on its planned Energia Costa Azul LNG liquefaction project on Mexico's Pacific Coast, the company said July 23.

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The firm is working closely with the authorities as they evaluate the merits of the permit, executives said during the company's second-quarter 2020 earnings conference call.

"We are quite confident that we are going to get it before the year ends," said Carlos Ruiz Sacristan, chairman of the board.

IEnova had expected to reach an FID for Energia Costa Azul in the first quarter of the year, but the coronavirus pandemic caused government offices to shut and halt all permit processing.

"The government is still formally closed," Tania Ortiz Mena, CEO, said during the call.

IEnova, which operates storage terminals around the country, has one-year permits to export gas through pipelines to the US.

The Energia Costa Azul permit will be the country's first for the export of LNG from a terminal. It will also be the first in the country to be granted for 20 years, Alexandra Violante, investor relations officer, told S&P Global Platts after the call ended.

The gas will most likely end up in Asia and Europe. The route to Asia from the Pacific Coast is shorter than from the Gulf Coast, and avoids Panama Canal congestion and fees.

IEnova has met all the requirements and no major issues were raised by the authorities are impossible to address, Chief Financial Officer Nelly Molina said during the call.

IEnova is also making progress on other requirements for reaching an FID this year. During Q2, IEnova executed sale-and-purchase agreements with Total and Mitsui that together with the import permit are the key to reaching an FID, Ortiz Mena said.

IEnova had signed heads of agreement with Total, Mitsui and Tokyo Gas for the full export capacity of Phase I of the project, which is expected to produce 2.4 million mt/year of LNG, or nearly 310 MMcf/d of gas equivalent, upon entering service.

Ruiz Sacristan mentioned during the call that one of the offtakers had expressed interest in "acquiring equity" in the project, without providing details. Violante declined to comment on the party's identity.

Sempra has sold equity stakes at other projects to finance their construction. In Louisiana, Sempra has created a joint venture with Total, Mitsui and Japan LNG Investment to build an LNG terminal.

That is also how the company plans to support construction of an LNG terminal in Port Arthur, Texas.