Private equity players eye opportunities - LatAmConfidential. com
Mexico – energy groups to tap capital markets. Published 27 Nov 2014.
Private equity players eye opportunities. The fall in oil prices may be taking the edge off investor appetite, but plans to raise funds for the energy sector are still very much in motion.
Our interviews with private equity players suggest interest in energy companies is growing. Advent International, the US private equity fund, raised $2.1bn in November to invest in ten to 15 companies in Latin America over the next four years. According to Luis Solórzano, Advent’s head in Mexico, it is currently in talks with companies that provide oil services to Pemex.
“We think there will be significant growth in demand for oil services, and there will be a lot of activity on the exploration and production side and midstream infrastructure,” he said. He expects the reforms will push companies to become more formalised which could weed out the good from the bad. “We are trying to assess which of these companies will sink or swim as the market changes over the next few years,” he said.
Arturo Saval of Nexxus Capital, the largest independent private equity firm in Mexico, is also wary of informality in the sector and overcrowding in some areas such as rig leasing, which has seen a spike in recent months. The group is eyeing opportunities to invest in oil and gas service companies, gas pipelines and electricity. Antonio Ruiz Galindo, the head of Mexico’s private equity association, Amexcap, expects private equity funds in Mexico will raise as much as $5bn in 2018, up from an estimated $1.4bn this year. Many of these investors are targeting “secondtier providers” in areas of infrastructure such as logistics and transportation, oil services and renewable energy. In addition to the Fermaca investment mentioned above, a number of private equity funds have invested in Mexico’s energy sector. For example, in September, private equity investors Riverstone (RSE:LSE), EnCap Investments and Mexico’s Infraestructura Institucional founded Sierra Oil & Gas, Mexico’s first independent oil exploration and production company. And last year, US private equity firm Evercore Partners (EVR:NYSE) bought a 20% stake in Grupo Diavaz, the Mexico Citybased oil services provider.