Follow-On Offering of the Year & Private Equity Deal of the Year - IEnova

Follow-On Offering of the Year & Private Equity Deal of the Year - IEnova

Equity Capital Markets Mexico

Three years after its 2013 IPO, IEnova’s stock price had more than doubled, offering an ideal opportunity to increase equity. And for CEO Carlos Ruiz, a follow-on offering gives IEnova a balanced mix of capital and debt. “Since we are growing, it was important to raise capital to fund growth,” he says.

Much of the energy company’s growth has come through acquisitions, including the roughly $1.1 billion Gasoductos de Chihuahua pipeline from state-run Pemex.

“We had [more] acquisitions in mind and we wanted to increase the liquidity of our stock,” says Ruiz.

Typically, when companies announce an equity sale, their stock price dips. But when IEnova unveiled its follow-on in October 2016, its shares rose above 83 Mexican pesos, representing a 5.6% premium from launch date to pricing day. IEnova offered the stock for 80 pesos, only a 1.1% discount to its last closing price, making it LatinFinance’s Follow-on Equity Offering of the Year.

“We wanted to make sure our story was well known,” Ruiz adds. “We reached 110 investors and spoke with a further 81 at group events.”

Infrastructure funds, retail investors, and Mexican pension funds combined for an orderbook that was four times oversubscribed, allowing the company to raise $1.6 billion, including overallotments.

“Roughly 61% of buyers came from the US, 18% from Mexico, 12% from Brazil and Chile, and 9% from Europe,” Ruiz says. “We wanted to ensure we got long-term investors and when we did, the share price  went up.”

Unlike several transactions, where funds or parent companies use equity sales to reduce exposure to assets, IEnova’s US parent Sempra Energy did the opposite, placing a $300 million anchor order for new shares.

“Sempra recognized that we needed to continue to grow and it did not want to dilute,” Ruiz says. “This shows something to the market. Our parent company continues to finance.”

With Sempra easing investor concerns, IEnova’s stock soared in subsequent weeks. Not only did the company increase equity capital, but IEnova then snapped up Mexico’s largest wind farm complex – Ventika.

Mexico’s energy reforms remain a pillar of policy for President Enrique Peña Nieto’s administration. And for IEnova, the reforms represent new opportunities.

“Previously we operated in just LNG [liquefied natural gas] and natural gas, but now we have a chance to sell clean energy not just to the government, but also to the private sector,” Ruiz says.

IEnova agreed to buy Ventika for $375 million in cash and took on roughly $477 million in debt from Fisterra Energy, a portfolio company owned by private equity firm Blackstone.

Ruiz says the purchase offered an opportunity to provide wind power from northern Mexico to California. “Ventika made sense for us. It is important in size and has a diverse customer base,” Ruiz says. And for its execution, IEnova’s purchase of the wind farm is LatinFinance’s Private Equity Deal of the Year.

For Blackstone, its investment in Ventika has come full circle since signing a $650 million package for the wind farm complex in April 2014. Through its Fisterra fund, the private equity firm co-developed the 252 MW facility with Mexico’s Cemex. The two wind farms started operations in April and Cemex continues to be project operator. LF