A $680 million financing closed Thursday for the proposed 1 Bcf/d Manzanillo liquefied natural gas (LNG) receiving terminal on the West Coast of Mexico in the state of Colima, according to the coalition lenders on the deal.

A consortium of Mitsui & Co. Ltd. (37.5%), Samsung Engineering & Construction (37.5%) and Korea Gas Corp. (25%) last year secured the 20-year contract for the $875 million project with the Mexican government’s electricity commission (see Daily GPI, March 11, 2008). The project, which was delayed in its early development as long-term supply contracts were being developed, is still scheduled to be completed by the end of 2011.

The project has attracted international interest from the start, and at one point the bidding process was extended by the Mexican government as Mitsui, Spain’s energy giant, Union Fenosa SA, and Mitsubishi competed to build the terminal.

The lenders included the Export-Import Bank of Korea and seven commercial banks — Mizuho, Calyon, BTMU, SMBC, BBVA, Standard Chartered Bank, and Development Bank of Japan. Attorneys from Milbank, Tweed, Hadley & McCloy LLP, led by partner Dan Bartfeld, represented the lenders.

Bartfeld called the transaction “the largest ever joint Japanese-Korean development of an energy project in Latin America.” He predicted the project would “significantly increase” the Mexican gas infrastructure for future electric generation projects. Even in the difficult global credit and economic times projects like this one “can still mobilize capital,” Bartfeld said.

Driving this project and the international interest has been the Mexican state power authority’s desire to greatly expand its gas-fired electricity portfolio. Three years ago, the Comision Federal de Electricidad (CFE) said it foresaw the need for nearly 28,800 MW in new power generation capacity over the next 10 years, and between 12,000 MW and 15,000 MW of that was identified as coming from gas-fired combined cycle plants (see Daily GPI, Oct. 30, 2006).

The development of an LNG terminal that can process up to 1 Bcf/d at the Pacific Coast port of Manzanillo, with connecting pipelines heading north to the growing greater Guadalajara metropolitan area, was described by a U.S.-based consultant early last year as just the tip of the iceberg regarding long-range LNG development in Mexico and throughout the Pacific Rim.

CFE has always been closely tied to the Mexican LNG development as it continues building new, and converting old oil-fired, plants to, combined-cycle natural gas generation facilities in all of Mexico’s burgeoning industrial areas and population centers. The Mexican constitution states that the federal government is responsible for the control and development of the national electric industry, and CFE carries out this mission.

A consultant’s report done early in 2008 indicated the Mexican southwest-central region’s only existing power plants are in Manzanillo (2,000 MW capacity); however, CFE plans to build two 550 MW plants in Guadalajara, a city of 1.5 million with a metropolitan area of five million, which has no local power generation plants currently (see Daily GPI, Feb. 1, 2008).

The proposed Manzanillo LNG terminal is slated for a lagoon area about eight miles north of the existing busy cargo-carrying ship harbor and pleasure boat marina that makes up the Mexican West Coast’s largest port.

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