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IDB approves $177.3 million in financing for Mexico power project

The Inter-American Development Bank today announced the approval of $177.3 million in financing to support Termoeléctrica del Golfo, a private sector project for a 230 megawatt power plant in the Mexican state of San Luis de Potosí that will generate electricity for cement plants in central and northern Mexico.

Termoeléctrica del Golfo is one of the first private self-generation projects to be developed under Mexico’s new regulatory regime for the electricity sector, which allows tariffs to be set freely among private parties. As such, the project represents a key step towards the creation of a competitive electricity market.

The new thermoelectric plant will supply electricity to 13 cement plants owned by Cemex, S.A. de C.V., the largest Mexican
cement producer and the world’s third largest, in the central and northern regions of Mexico. Surplus power generated by Termoeléctrica del Golfo will be sold to state utility Comisión Federal de Electricidad.

Besides adding capacity to the Mexican power grid in an area with rising demand, the new plant will be fueled with petroleum coke, a byproduct of a state-owned oil refinery that is being refurbished to produce gasoline with low sulphur content.

The financing will be granted to Banco Nacional de México, S.A., as trustee of a trust created to develop the project. The sponsors of the project are ALSTOM of France and the U.S.-based Sithe International, Inc., which teamed up to win an international tender called by Cemex last year for the new power plant.

Through a Mexican Business Trust, the sponsors will build, finance and run Termoeléctrica del Golfo for 20 years, after which ownership of the power plant will be transferred to Cemex. ABB ALSTOM POWER will be the project’s engineering, procurement and construction contractor. Sithe, in which French utilities, construction and media group Vivendi and the Japanese trading company Marubeni Corporation hold major stakes, will be the operator.

IDB financing consists of a $75 million loan from the Bank’s ordinary capital and a syndicated loan for $102.3 million, with funds provided by commercial banks under subscription of participation agreements with the IDB. Deutsche Bank AG of Germany and ABN AMRO Bank N.V. of the Netherlands are the arrangers of the syndicated loan.

The sponsors expect to provide $92.4 million in equity and equity support to the project, which will also have $100 million in risk coverage provided by the French export credit agency COFACE.

The IDB helped finance Samalayuca II, Mexico’s first private sector power plant in 1995. In 1996 provided financing for the Yucatán Gas Pipeline, the country’s first major, open-access, privately owned and operated natural gas pipeline, which entered into commercial operation in September 1999. Earlier this year the Bank approved a loan for the Hermosillo power project, the first Mexican Independent Power Producer with an option to shift to a competitive market once such market is established in Mexico.

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