El Encino - La Laguna Natural Gas Pipeline

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In December 2014, Fermaca Pipeline El Encino S de R.L. de C.V was awarded a 25-year contract to construct and operate a 465-km natural gas pipeline linking the northern Mexico the towns El Encino (Chihuahua) and La Laguna (Durango). The contract was awarded by the national regulatory agency Comision Federal de Electricidad (CFE). The Swiss private equity fund Partners Group is the majority shareholder (87%) in Fermaca, alongside Mexican pipeline developer Compania Mexicana de Gas Natural (Grupo Diavaz). Besides Fermaca Pipeline el Encino, the following companies took part in the competitive bidding: IEnova, Transcanada, Carso-Energy Transfer-MTCO y Energia de Mexico and Enagas-Elecnor. The bidding criteria was the lowest cost of investment in the project. The winning bid was 59% below the ceiling set by CFE. The investment was estimated at US$ 826.2 million. The financial closure was achieved in July 2015, when a financing package of US$ 610.2 million was provided by international banks. Citigroup, ING Group, Nord LB and Santander each contributed US$ 121.3 million, while Banco Sabadell lent US$ 75 million and Goldman Sachs lent US$ 50 million. The three-and-a-half year loan was priced at Libor plus 185 basis points (the grace period on the loans was the duration of the construction period plus six months). The sponsors contributed US$ 216 million in equity. Construction works started in March 2015, and commercial operations were expected to commence by March 2017. The pipeline was set to have a capacity of 1500 million cubic feet per day.