JBIC EXTENDS LOAN FOR POWER PLANT INVESTMENT IN MEXICO --JBIC Provides Political Risk Guarantee For IPP--
1. Japan Bank for International Cooperation (JBIC; Governor: Hiroshi Yasuda) will sign today (4 p.m. EST) in New York a loan agreement totaling $217 million for a power plant investment with Electricidad Aguila de Tuxpan, S. de R.L. de C.V. (EAT), jointly founded in 2000 in the United Mexican States by Mitsubishi Corp. and Kyushu Electric Power Co. Ltd. The loan is cofinanced with Fuji Bank (lead bank), Dai-Ichi Kangyo Bank, the Bank of Tokyo-Mitsubishi, and B.N.P. Paribas, Tokyo Branch, Standard Chartered Bank, Tokyo Branch, and Citibank, N.A., Tokyo Branch with JBIC assuming a 60 per cent share, or US$130.2 million. The loan will provide long-term funds for a combined cycle power project at Tuxpan to be executed by EAT. In this project, the commercial risk is borne by the cofinancing commercial banks, while JBIC plays a supportive role by providing a guarantee for the political risk.
2. The purpose of this BOO (Build, Own and Operate) project is to build a combined cycle power plant with a capacity of 495 MW in Tuxpan, State of Veracruz, 250 kilometers northeast of Mexico City and sell generated power to the Comision Federal de Electricidad (CFE) for a period of 25 years. The project is not only executed by a Japanese-owned project company, but it is also the first IPP (independent power project) in a developing country where Japanese firms undertake procurement, project operation and business control on their own. Kyushu Electric Power, which has a 30 percent equity stake in the project company, will effectively operate the plant and take care of its maintenance. This is Kyushu Electric's first substantial participation in an overseas IPP. In this respect, it will be a model for future overseas operations by Japanese power companies.
3. Power demand in Mexico is projected to grow by 6.1 per cent annually through 2008, reflecting robust macroeconomic conditions. The peak demand in 2008 will show a 1.6 fold increase from 1999. To meet growing power demand, the country has to build new power plants that provide an additional 22,000 MW capacity. The Government of Mexico has been promoting IPP and other projects that tap private sector resources since it amended the law regulating the power business in 1992. This loan is in support of IPP executed by Japanese firms.
4. Financial support for this project will help Japanese firms accumulate knowhow in the area of IPP in developing countries, increase the presence of Japanese firms in Mexico, and contribute to economic development of Mexico by ensuring a stable domestic supply of electric power.