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IDB approves $70 million for 437-Km natural gas pipeline integrating Argentine, Brazilian hydrocarbon systems

The Inter-American Development Bank today announced the approval of $70 million in financing to support the development, construction, operation and maintenance of a 437-kilometer natural gas pipeline in northern Argentina that will supply fuel to a 600-megawatt thermoelectric power plant in Uruguaiana, Brazil.

The 24-inch pipeline will be owned and operated by Transportadora de Gas del Mercosur, S.A., a special purpose company whose shareholders include Nova Gas Internacional S.A., Tecgas N.V., CMS Gas Argentina Company, and Petronas Argentina S.A.

The project will advance the energy integration of the Mercosur region by promoting the export of an important Argentine commodity as well as helping Brazil diversify its energy sources with an environmentally clean thermal fuel source.

The pipeline will go from Aldea Brasilera in the Argentine province of Entre Ríos to Paso de los Libres in the neighboring province of Corrientes and to the border with Brazil on the Uruguay River. A pipeline is currently being built on the Brazilian side to deliver the natural gas to the plant in Uruguaiana, in the state of Rio Grande do Sul. TGM will supply at least 2.8 million cubic meters of natural gas a day from reserves in the Neuquén Basin in southwestern Argentina.

This project will mark the first direct interconnection of the Argentine and Brazilian hydrocarbon network systems, and it may eventually be expanded to provide natural gas to the city of Porto Alegre in Brazil.

The IDB financing consists of a $40 million loan from the Bank's ordinary capital and a $30 million syndicated loan with funds provided by other financial institutions through subscription of participation agreements with the IDB.

Private sources are expected to provide approximately $63 million in debt and equity financing, while the Overseas Private Investment Corporation, a U.S. government agency, is expected to provide about $27 million in debt financing.