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We advised Bank of Tokyo-Mitsubishi UFJ, LTD., HSBC Bank USA, N.A. and Sumitomo Mitsui Banking Coporation in the project financing for the construction and operation of Samay’s 593-megawatt cold reserve power plant to be located in the southern coastal region of Peru, which is a key component of the power energy plan of the Peruvian government for the south of the country, which in turn involves the construction and operation of the Southern Peru Gas Pipeline (Gaseoducto del Sur Peruano or “GSP”). As part of such plan, when constructed, GSP shall be connected to the project (and other similar projects in such region) in order to generate electricity for the south of Peru using gas. In the meantime, the project will run using diesel, fuel giving assurance to the Peruvian electricity system in case of shortfalls in the production of electricity.

The plant is to be located in Mollendo, in the region of Arequipa, about 480 miles southeast of Lima. An associated 500-kilovolt gas-insulated substation, and a 36-mile transmission line connecting the cold reserve plant to a substation in the nearby district of La Joya, are also in development. The main objective of this transaction was to finance the construction and operation of the cold reserve power plant . The transaction was closed in the short term and involved financing a project from its construction stage. For this, besides agreeing upon a construction plan, it was necessary to develop a complex scheme of guarantees that captured the whole set of assets and flows of the project.

The relevant issues surrounding the construction of this project were primarily linked to meeting the demand on energy, under the framework of the southern electric node. This had to be accomplished taking into account the elevated costs of production involved in diesel cold reserve plants (in contrast with hydroelectric or wind power plants) as well as the dispatches of energy. We advised the lenders and administrative agent in the structuring of the project financing.