Private Investors Look But Do Not Leap At Mexican Energy Projects

The $250 million, 172-kilometer Morelos pipeline being built by Spanish companies Enagas and Elecnor is two years behind schedule due to trouble getting rights of way from the owners of the 2,000 small plots of land the pipeline will pass through.

It has been hard to even find the owners of those plots, some just 1 square meter in size, but since getting the permissions, construction has run on time, an Enagas spokeswoman said. Recently passed laws should make it easier to handle such disputes but they have not yet been tested, said Marisol Gonzalez de Cosio, a director at Standard & Poor's.

Security and corruption issues also give investors pause.

Texas-based energy firm Key Energy Services Inc. took a $2.2 million charge in the first-quarter for assets destroyed after an arson attack on a facility in Tabasco state.

A spokesman for Key Energy Services referred to the company's public statements.

Problems likes these have caused investors including CalSTRs to move cautiously.

"We would have concerns about where the asset is located and what the security issues are," said Paul Shantic, who oversees inflation-sensitive investments at CalSTRS.