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A TransCanada Keystone Pipeline pump station operates outside Steele City, Nebraska, in this file photo taken March 10, 2014. TransCanada said Monday it will spend about $550-million (U.S.) to build a 420-kilometre natural gas pipeline in Mexico.LANE HICKENBOTTOM/Reuters

TransCanada Corp. says it will spend about $550-million (U.S.) to build a 420-kilometre natural gas pipeline in Mexico.

The Calgary-based company says the line would supply Mexico's state-owned power company with nearly 900 million cubic feet of natural gas a day.

TransCanada expects the new line will be in service in early 2018. It would become one of six major natural gas pipeline systems that TransCanada operates in Mexico.

"The Tula – Villa de Reyes Pipeline complements our existing pipeline network in Mexico and furthers our strategy of owning and operating highly contracted and regulated assets that generate stable and predictable earnings and cash flow streams," said Russ Girling, TransCanada's president and chief executive officer, in a statement.

The new line would begin in Tula, in the central state of Hidalgo northof Mexico City, and travel northwest to Villa de Reyes in the state of San Luis Potosi, transporting natural gas to power-generation facilities there.

The Tula-Villa de Reyes line would also connect with two other TransCanada pipelines and other gas transporters in the region. By 2018, TransCanada will be operating six major natural gas pipeline systems in Mexico representing an overall investment of approximately US$3.6-billion, the company said.

TransCanada's expansion in Mexico coincides with the country's overhaul of its energy industry that ended the state-run monopolies of the Comision Federal de Electricidad and Petroleos Mexicanos, opening the door to private investment. Mexico plans to expand its pipeline infrastructure 75 per cent by 2018 and is seeking as much as $10-billion in investment for 24 new projects in the short term, according to Enrique Ochoa, chief executive officer of the CFE, as the state-run utility is known.

With files from Bloomberg News and Globe Staff

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