In its latest large-scale project finance transaction in Latin America, law firm Milbank, Tweed, Hadley & McCloy has represented a group of international lenders in financing a 237-mile, 36-inch natural gas transmission pipeline being laid in the Mexican state of Chihuahua, with an interconnection point at the US / Mexico border. The debt provided was a US$378 million facility, while total project costs for the pipeline – expected to bring US supplies of natural gas to several Mexican states – are estimated at US$472 million.
The borrower has entered into a 25-year natural gas transportation services contract with Mexico’s state power company, Comisión Federal de Electriciad (CFE), for the transport of natural gas sourced from the U.S. The project is sponsored by Fermaca Global L.P., a partnership established between the Fermaca Group (an established company in the energy and construction sector in Mexico), Ospraie Fund and Ospraie Special Opportunities Fund (both New York-based investment funds). The pipeline will be operated by Tejas Gas de Toluca, S. de R.L. de C.V., a Fermaca Global L.P. subsidiary which owns and operates the Tejas Gas de Toluca natural gas transmission pipeline.
The lender group was comprised of seven institutions from Asia, Europe, Canada and Latin America (including two Mexican infrastructure development banks): (1) The Bank of Tokyo Mitsubishi UFJ, Ltd., (2) Crédit Agricole Corporate & Investment Bank, (3) ING Bank N.V., (4) Nacional Financiera, S.N.C., (5) Banco Nacional de México, S.A., integrante del Grupo Financiero Banamex, (6) Banco Nacional de Obras y Servicios Públicos, Sociedad Nacional de Crédito, Institución de Banca de Desarrollo and (7) The Bank Of Nova Scotia.
“When it’s completed, the Chihuahua pipeline will be a critical piece of Mexico’s power infrastructure, with natural gas from the US being used to increase Mexican electricity generation” said Milbank project finance partner Daniel Bartfeld. “We are pleased to have advised such a world-class group of lenders in delivering the financing to complete this important energy infrastructure project in Mexico.”
Working with Mr. Bartfeld was Milbank project finance partner Carolina Walther-Meade, who regularly advises international lenders on cross-border infrastructure and energy projects. “This financing is especially gratifying for bringing together a truly diverse set of institutions – a select group of global commercial banks partnering with key state-owned development banks in Mexico,” Ms. Walther-Meade said. “The scale of financing is an excellent model for the kind of project financings for which Milbank is well known.”
Also part of the finance deal team were Milbank project finance partner Daniel Michalchuck, and associates Nicholas Smallwood and Marisa Fershing.
Milbank is well in the midst of another strong year for financings in Latin America. In 2011, the firm advised on nearly 50 transactions in the region totaling $35 billion, including 14 large project finance deals totaling $10.4 billion.
