Ternium S.A. (NYSE: TX), Tenaris S.A. (NYSE, Buenos Aires and Mexico: TS and MTA Italy: TEN), and Tecpetrol International S.A. said Aug 19 that they have entered into a memorandum of understanding to jointly build and operate a natural gas-fired combined cycle electric power plant in Mexico.
The plant would supply Ternium’s and Tenaris’s Mexican industrial facilities. Together, both companies are one of the largest private energy consumers in Mexico. Tecpetrol is a wholly-owned subsidiary of San Faustín S.A., the controlling shareholder of both Ternium and Tenaris.
The power plant would be built in the Pesquería area of the State of Nuevo León, and would have a power capacity of between 850 MW and 900 MW. The project would be undertaken through a joint venture vehicle named Techgen, S.A. de C.V., which would be owned 30% by Tecpetrol, 22% by Tenaris and 48% by Ternium.
The memorandum of understanding contemplates, among other things, that Techgen would enter into power supply and transportation agreements under which Tenaris and Ternium would contract 22% and 78%, respectively, of Techgen’s power capacity.
The commencement of the project would be subject to execution of definitive documentation and other customary conditions, including receipt of regulatory approvals and specific agreements with Mexican utility Comisión Federal de Electricidad.
The total investment required for the project is estimated in approximately US$1bn, and would be partially financed with debt. The combined cycle electric power plant is expected to be operational in the fourth quarter of 2016.
Paolo Rocca, Ternium’s Chairman, and Tenaris’s CEO and Chairman, said: “This project contributes to the long term competitive position of our industrial activities and strengthens Mexico’s electricity system. The recently announced Energy Reform would enhance the benefits of this significant investment.”
Tecpetrol is a company operating in the energy sector. With over 7,500 employees, Tecpetrol’s activities are organized in two main business units: oil and gas exploration and production (E&P), and gas and power transportation and distribution (G&P). The E&P division operates in Argentina, Bolivia, Colombia, Ecuador, Mexico, Peru, Venezuela and the U.S., and the G&P division operates gas and liquid transmission systems in Argentina, Peru and Mexico. Tecpetrol generates energy for its own production and consumption.
Tenaris is a leading global supplier of steel tubes and related services for the world’s energy industry and certain other industrial applications.
Ternium is a leading steel producer in Latin America, with an annual production capacity of approximately 10.8 million tons of finished steel products. With production facilities located in Mexico, Argentina, Colombia, the southern U.S. and Guatemala, Ternium serves markets in the Americas through its integrated manufacturing system and extensive distribution network. In addition, Ternium participates in the control group of Usiminas, a Brazilian steel company.