Tuxpan V

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The Mexican government, under the Comision Federal de Electricidad (CFE), awarded a greenfield contract to build, own, and operate and electricity generation plant in Mexico’s state of Veracruz. The project company, Electricidad Sol de Tuxpan, will generate 495 MW for consumer distribution through CFE. The project company will do this through a 25-year power purchase agreement (PPA). The PPA will go into effect upon construction completion (expected September 2006). The Tuxpan plant is located near the city of Tuxpan de Rodriguez Cano (state of Veracruz). Establishing the additional generation capacity was deemed necessary by the government of Mexico in order to meet the rising electricity demand; the addition of Tuxpan was one of several plants scheduled for 2004 onwards in order to add 25,000 MW generation capacity between 2004 and 2012. The contract was awarded (based on a competitive tender) in December 2003 and the PPA was signed with CFE in January 2004. The winning consortium, Electricidad Sol de Tuxpan, comprises Mitsubishi Corp. (70 percent project ownership) and Kyushu Electric Power Co. (KEPCO – 30 percent project ownership). Operation and maintenance of the plant was contracted under a six year sub-contract to NAES Mexico, a subsidiary of North America Energy Services Company. This sub-contract was expected to commence upon construction completion. Financial closure for the US$300 million project was achieved in July 2004. This was the first independent power producer (IPP) in Mexico to achieve financial closure before the start of facility construction; the six-month lag between awarding the contract and reaching financial closure was relatively fast in the Mexican energy history. Project financing was reached with sponsor contribution of 30 percent (distributed between Mitsubishi and KEPCO according to their respective project ownership), JBIC financing of 42 percent, and commercial bank loans of 28 percent. Due to the high use of commercial bank loans, JBIC issued a political risk guarantee covering 97.5 percent of the commercial bank loans. The Tuxpan V project follows on Tuxpan II and Tuxpan III and IV projects; the sponsor composition at the time of contract signing was identical to that of Tuxpan II. The new natural-gas fueled plant is a combined-cycle plant with a capacity of 495 MW. Mitsubishi Corp. will manage the construction of the facility and a subsidiary of North America Energy Services Company (NAES Mexico) will operate and maintain the plant for the initial six years of operation. The operations and maintenance contract is between the project company and NAES Mexico. Operations commenced in September 2006.