TC Energy's Southeast Gateway Pipeline: A Strategic Anchor in Mexico's Natural Gas Renaissance

The completion of TC Energy's Southeast Gateway Pipeline (SEGP) in June 2025 marks a pivotal moment for both the Canadian energy giant and Mexico's rapidly evolving natural gas landscape. With a capacity of 1.3 billion cubic feet per day (Bcf/d), this 715-kilometer pipeline has been operational for just over a month, already delivering tangible benefits to TC Energy's bottom line while positioning the company as a critical partner in Mexico's energy transition. This article explores the pipeline's strategic value as a revenue-generating asset, its role in Mexico's infrastructure boom, and the catalyst it represents for TC Energy's long-term growth.

Operational Excellence and Cost Discipline

The SEGP's journey from planning to operation underscores TC Energy's ability to execute large-scale projects efficiently. Construction began in 2022, and the pipeline was completed 13% under budget at $3.9 billion, versus the original $4.5 billion estimate. This financial discipline is a stark contrast to many energy infrastructure projects plagued by cost overruns, and it signals TC Energy's operational prowess in a sector where execution risk often derails timelines and budgets.

The project's completion ahead of schedule—under three years from final approval—also highlights the company's agility. For investors, this bodes well for future projects, as TC Energy demonstrates it can navigate regulatory and logistical hurdles effectively.

Revenue Generation: A 30-Year Cash Flow Machine

The SEGP's operational lifespan is a cornerstone of its investment appeal. With a 2055 contract expiration with Mexico's Comisión Federal de Electricidad (CFE), the pipeline guarantees TC Energy decades of stable revenue. Toll collection began in May 2025, with CFE making timely payments, and the project is expected to contribute meaningfully to the company's cash flow for decades.

The pipeline's strategic interconnections—supplying the Yucatan Peninsula and linking to other gas infrastructure—also open doors for interruptible users beyond CFE. However, regulatory approval from Mexico's National Energy Commission (CNE) for regulated rates to serve these users remains pending. While the CNE's delayed decision poses some uncertainty, TC Energy's strong relationship with CFE and Mexico's broader push to expand gas access suggest this hurdle will be cleared soon. Once approved, interruptible capacity could add millions annually to TC Energy's revenue.

Strategic Role in Mexico's Energy Transition

Mexico's energy strategy hinges on natural gas as a bridge fuel to reduce reliance on coal and oil. The SEGP directly supports the government's plan to add 8.5 gigawatts of gas-fired power capacity, fueling industrial growth and reducing emissions. The pipeline's route supplies 10 planned CFE power plants, ensuring affordable gas for utilities and industries while cutting carbon intensity in Mexico's energy mix.

Economically, the project's impact is profound. By enabling industrial activity and reducing regional inequality, the SEGP is projected to generate 4,000 direct and indirect jobs, with states gaining gas infrastructure seeing a 50% higher GDP per capita than those without. For TC Energy, this reinforces its role as a partner in Mexico's development—a relationship that could lead to future projects as the country expands its gas network.

Competitive Position and Future Opportunities

TC Energy's partnership with CFE sets a precedent for public-private collaboration in Mexico's energy sector. While delays in the southern section of the Villa de Reyes pipeline (now delayed to 2026) highlight lingering regulatory challenges, the SEGP's success demonstrates the company's ability to adapt.

Looking ahead, TC Energy's focus remains on leveraging its existing assets. With Mexico's gas demand projected to grow as utilities shift from costly fuel oil, the SEGP's capacity could see utilization rise steadily. Additionally, any approval of regulated rates would unlock new revenue streams from industrial users, further boosting returns.

Investment Takeaways

• Long-term stability: The SEGP's 30-year contract and contracted cash flows reduce revenue volatility for TC Energy.
• Regulatory tailwind: Mexico's push for gas infrastructure bodes well for future projects and rate approvals.
• Undervalued asset: TC Energy's stock trades at a discount to its peers despite its strong operational track record, suggesting upside potential.

Conclusion

The Southeast Gateway Pipeline is more than an infrastructure project—it's a linchpin of TC Energy's growth in Mexico and a testament to the company's ability to capitalize on energy transition trends. With regulated rates pending and a backlog of demand from Mexico's industrial and utility sectors, the SEGP's true earnings potential remains untapped. For investors seeking exposure to a stable, cash-generative asset in a high-growth market, TC Energy's Mexican ventures warrant serious consideration.

As regulatory clarity emerges and demand accelerates, TC Energy's leadership in Mexico's gas renaissance could propel its stock higher—a bet on the pipeline is a bet on Mexico's energy future.