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(Reuters) - TransCanada Corp (TRP.N) (TRP.TO), Canada's largest pipeline operator, said its Mexican unit was awarded a $400 million contract from Mexico's federal power company to build a natural gas pipeline in the north-western state of Sinaloa.
The latest contract is an addition to the $1 billion contract that TransCanada won from the Comision Federal de Electricidad (CFE) last week for the El Encino to Topolobampo pipeline.
The 413 km (260 mile) pipeline, which will have a capacity of 202 million cubic feet per day, will be built between El Oro and Mazatlan in Sinaloa.
Most of Mexico's electricity generation comes from conventional thermal plants. However, natural gas is increasingly being used as a feedstock in power generation.
Mexican President-elect Enrique Pena Nieto, who will take office on December 1, has said one of his top priorities is to attract more private investment into the country's energy sector.
Last month, Sempra Energy's (SRE.N) unit, Sempra Mexico, was chosen to build a $1 billion natural gas pipeline to transport U.S. natural gas to Mexican government-owned power plants that until now have run on fuel oil.
The El Oro to Mazatlan pipeline will interconnect the El Encino to Topolobampo pipeline and is expected to be in service in the fourth quarter of 2016.
The construction of both pipelines is supported by 25-year natural gas transportation service contracts with the CFE, the company said.
TransCanada currently operates the Guadalajara and Tamazunchale natural gas pipelines and will soon break ground on a Tamazunchale pipeline extension in central Mexico.
The company operates the Keystone pipeline that has the capacity to transport a quarter of Canada's crude oil exports to the United States.
TransCanada, whose power plants in the U.S. Northeast were undamaged by Hurricane Sandy, will decide early next year on whether to go ahead with a 1-million-barrels-per-day pipeline from Alberta's oil sands to refineries in eastern Canada and on the U.S. East Coast.
Goldman Sachs raised its price target of the company's stock to C$50 from C$42, citing demand-driven infrastructure growth for diversified pipeline companies. It also raised its target on five other pipeline company stocks.
Shares of TransCanada, which has a market value of about C$32 billion, were up slightly at C$45.34 on Monday on the Toronto Stock Exchange. (Reporting by Krithika Krishnamurthy in Bangalore; Editing by Roshni Menon)