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Project finance: Mexico capitalizes on power project track record

Biggest Korean investment in Mexican power sector; Further deals in the pipeline

Asian investment into Latin America continues apace after financing closed last month for a power-generation project in Mexico involving Korean institutions.

While Japanese and increasingly Chinese investment into the region has grabbed headlines, Korean interest in Latin America has been more limited. But that might be about to change.

Last August Korea Electric Power (Kepco) and Samsung, together with Argentina’s Techint, won the contract to build, own and operate the 433MW Norte II power plant in Mexico’s northern state of Chihuahua.

It’s for that project that financing has just closed, with the consortium signing a $325 million club loan with three banks. Export-Import Bank of Korea (Kexim) will provide $174 million through a direct loan. In addition, mandated lead arrangers Crédit Agricole and Sumitomo Mitsui Banking Corporation will supply an $86 million Kexim-guaranteed loan. The two banks will also provide a $65 million non-guaranteed loan. The debt’s tenor is for 21 years and 10 months with a two-and-a-half year grace period.

The size of the loan provided proved less than the $350 million initially provisioned after final costs were lower than expected. The debt will fund construction and repay an $85 million equity bridge provided by the sponsors in December.

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