Jaime Calpe
Director General
TAG Pipelines
View from the Top

Translating Los Ramones into Success

Wed, 01/20/2016 - 13:22

Q: What is TAG Pipelines role in the current gas industry?

A: TAG, as a PEMEX affiliate, has natural gas transportation contracts, for which PEMEX is the client. Those contracts will be transferred to CENAGAS and operated by this entity. Since CENAGAS will be in charge of commercializing shipping capacity in projects, in this case Los Ramones, the system operator will become our client, replacing PEMEX in those transportation contracts. It is important to point out that our interaction with CENAGAS began at the time when the system operator was created, and we have been close since, as TAG acts as a shipper, developer, and strategic consultant for energy projects. CENAGAS has expressed its interest in hiring TAG’s services for some projects related to the Five Year Plan.

Q: Could you tell us about the financial scheme used in Los Ramones II project?

A: TAG Pipelines was the entity in charge of coordinating the project finance for both segments of Los Ramones II, and we were able to gather near to US$2.5 billion from both commercial and development banks, with the support of our financial division and PEMEX’s Directorate of Corporate Finance. In addition, we were backed up by Santander and BNP, our main agents in the southern segment. Santander was also our agent in Los Ramones II Norte. TAG Pipelines received four awards for its work in Los Ramones II Sur from LatinFinance and IJGlobal Americas, including Deal of the Year and Infrastructure Project of the Year. This was the result of joint collaborations and team effort, which ultimately led to the drafting of a financing scheme with competitive rates in a record time.

Q: What makes TAG projects attractive for funds?

A: One of the main features is being in contact with different projects and knowing their needs, which, rather than being the result of its affiliation with PEMEX, is due to our human resources, who know what a project requires and are experienced in developing and selling projects. This, paired with the experience we gained from wellcrafted and finely executed EPC contracts for Los Ramones II, has made several financial institutions take interest in our projects in the energy infrastructure sector. There are at least five robust funds, national and foreign, that are interested in collaborating with TAG for future projects. In my view, the most attractive feature is the fact that Los Ramones II is a reality. The Los Ramones pipeline system is a milestone in Mexico’s natural gas transportation sector, acting as the second backbone for the transportation and supply of this fuel, and the spearhead of the Energy Reform. This historic project will mark a tendency in natural gas developments in the country. When plans materialize and move forward, with projects being developed with the highest quality standards and always seeking integrity and sustainability, the companies involved become attractive to others willing to collaborate.

Q: What are the main lessons learned from your experience in Los Ramones II, and how did TAG Pipelines’ interests change after BlackRock and First Reserve acquired a 45% share of Los Ramones II?

A: After the project, TAG Pipelines ended up owning 5% of Los Ramones II Norte and Los Ramones II Sur, and although nothing has been decided yet, we might want to monetize this share in the future. As a result of this transaction, TAG Pipelines began transforming itself from a company originally created to be an owner and promoter of infrastructure, to a project developer who does not necessarily own the assets. We are now a company dedicated to project development and management, engineering, obtaining permits and rights of way, material procurement, and promoting investment in infrastructure projects, mainly for PEMEX, because we are an affiliate of the NOC. However, we have begun working with industrial clients who want to undertake their own projects. The experience we gained by working in Los Ramones II, jointly with the experience that TAG’s team has, enable us to offer a wide variety of services. Overall, the sale of shares to these funds has had a positive impact on the company. TAG Pipelines now has several contracts as a service and project development company in natural gas and LNG projects in the Trans-Oceanic Belt, in the Quetzal project, which is being developed to transport gas into Central America. We are beginning to work on creating alternative projects beyond our first achievement, Los Ramones II.