Power generation specialist ContourGlobal (GLO) is continuing its strategy of acquiring, developing and operating power assets and building its raft of contracts with its latest acquisition in Mexico.
ContourGlobal has agreed to acquire Alpek’s portfolio of two natural gas-fired combined heat and power (CHP) plants in Mexico, as well as development rights and permits for a third plant for $724m.
Located on Alpek’s petrochemical sites in Veracruz and Tamaulipas, the assets have a potential capacity of 932MW and are forecast to have around 90% of power and steam sales under long-term contracts.
EARNINGS ENHANCING
It is an exciting deal for ContourGlobal as the assets are expected to contribute $110m in earnings in the first full year of operations and may support a growing dividend.
The two existing plants, which boast installed capacity of 518MW, will offer electricity and steam to subsidiaries of Mexican conglomerate Alfa and other commercial and industrial customers.
The company also has the opportunity to construct a third plant with a planned capacity of 414MW and several green-lit permits.
Shares in ContourGlobal have sparked 2.8% to 190p on the deal as it builds its presence in Latin America’s second-largest power market.
The company is currently developing a 300MW wind farm in the state of Baja California.
RBC analyst Alexander Wheeler says ContourGlobal benefits from a strong development pipeline which together with its M&A strategy could see adjusted earnings double by 2022 from $513m in 2017.
