Sithe, Alstom complete Mexican power plant financing

Independent power producer Sithe Energies Inc. and France's Alstom Power say they have completed financing of the second phase of a 460 Mw net electrical generating project in the fast-growing Mexican market. The $700 million project in Tamuin, Potosi, Mexico, is the largest single foreign investment in the Mexican power generation sector to date.

Oct 30th, 2000


Independent power producer Sithe Energies Inc. and France's Alstom Power say they have completed financing of the second phase of a 460 Mw net electrical generating project in the fast-growing Mexican market.

The $700 million project in Tamuin, Potosi, Mexico, is the largest single foreign investment in the Mexican power generation sector to date.

The project consists of adjacent 230 Mw generating stations. TEG, the first plant, will sell its output to subsidiaries of Cemex SA, the world's third largest cement company. TEP, the second plant, will sell its output to affiliates of Industrias Penoles SA de CV, the world's largest producer of refined silver and one of Mexico's biggest vertically integrated natural resource company.

Experts say huge investments are needed to keep up with Mexico's electricity needs for the next decade. To serve demand for power that is growing 6%/year, Dionisio Perez, head of the investment promotion unit for the Secretariat of Energy, said in Houston Friday that it will take investment of nearly $10.5 billion/year for the next decade to keep pace.

The government has tried to boost electricity production by allowing outside investment in the state-run power sector such as the project in Tamunin.

By "attracting significant private sector investment, the project preserves public resources for other uses," said Sithe Chairman William Kriegel.

Both phases will be fired on petroleum coke supplied by Pemex. As with the phase one sales to Cemex, TEP's sales to the Penoles entities are under a 20-year power purchase contract, the companies reported. The $239 million TEP financing closed Oct. 24 and the plant is scheduled to begin operating in mid-2003, 6 months after TEG.

Kriegel said the its location will improve grid stabilization and transmission reliability in Mexico's industrialized northeastern region. It also provides an environmentally sound way to dispose of petroleum coke produced by the Cadereyta and Madero refineries and will foster Mexico's shift to the production of lighter, more environmentally friendly, petroleum products, he said.

The integrated project began with Cemex's international tender in 1998 for the 230 Mw TEG power plant to supply energy and capacity to Cemex subsidiaries. Sithe and Alstom Power won this tender and closed the related financing in April 2000 with a bank syndicate led by ABN-AMRO and Deutsche Bank, which included 'A' loans from the Inter-American Development Bank, 'B' loan participations and a tranche of debt covered by COFACE, the French export credit agency, on a 95% comprehensive basis post-completion.

Construction of the TEG plant began April 28 and is expected to begin commercial operation in late 2002.

Sithe and Alstom Power developed the project jointly and are 50%-50% equity investors in both phases of the project.

Sithe and Alstom Power raised more than $500 million of nonrecourse, long-term project debt, with about $220 million has COFACE coverage, the companies said. Alstom Power will build both power plants on a fixed price, turnkey basis and supply the circulating fluidized bed (CFB) boiler technology. Sithe will operate the facilities under long-term operations contracts and provide construction management services for the plants.

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