The Abraaj Group (“Abraaj” or the “Group”), a leading investor operating in growth markets, today announced it has invested in a 111 MW natural gas-fired power plant in Chihuahua, Mexico. The investment represents the first phase of Abraaj’s plan to develop a 500 MW natural gas-fired power generation platform (the “Platform”) in the country. The investment was made through an Abraaj-managed Fund focusing on opportunities in Mexico.
In order to address a large and growing demand for competitively priced energy in Mexico, Abraaj will leverage its global energy expertise to actively invest in gas-fired and renewable power generation projects, and natural gas midstream sector ventures. Abraaj has partnered with Emerging America (“EMA”), a Mexican firm that is developing natural gas-fired projects.
The power plant, which is being financed with debt from local banks Banorte and Nafinsa, is expected to commence operations at the beginning of 2019, and will enjoy a first-mover advantage in Mexico’s new wholesale power market. The plant is strategically located in the northern state of Chihuahua, which provides reliable access to competitive natural gas.
The Mexican power sector continues to grow rapidly, underpinned by an increasing demand for power from the manufacturing sector and a growing middle class. The Mexican Secretariat of Energy estimates that 55 GW of additional capacity will be required in the next 15 years to meet growth in demand. The government has implemented a stable and transparent regulatory framework with a target to achieve clean energy generation of 35% by 2024 and 50% by 2050.
Aligned with this framework, the Platform will bridge the energy gap and provide sustainable energy at competitive rates, reducing the cost of electricity for consumers. The inaugural plant in the Platform will be one of the first to come into operation under Mexico’s new legal and regulatory power sector framework. It will supply low-emission and efficient energy, compared to more highly polluting fuel oil power plants in the country. The plant will also enable the expansion of renewable energy by providing ancillary services to the grid to address energy deficits that arise from intermittent power generation.
Saad Zaman, Partner at The Abraaj Group, said: “This plant represents the first of many investments that Abraaj intends to carry out in the Mexican energy infrastructure sector. We have an advanced pipeline of attractive projects and will leverage our global energy expertise to develop complementary natural gas-fired and renewable energy platforms. Buoyed by a strong regulatory framework, the Mexican energy infrastructure sector is a long-term and sustainable investment opportunity for Abraaj. We are delighted to partner with Emerging America to deliver efficient and more affordable power to the country.”
Eduardo Cortina, Managing Director at The Abraaj Group, added: “This is an exciting first step for Abraaj into the energy market in Mexico. The Mexican government’s support and new policies have encouraged private capital investments to produce more efficient power generation. Our on-the-ground presence in Mexico, local market knowledge and extensive experience in developing energy projects globally make Abraaj uniquely positioned to ensure the timely construction of the power plant and the successful development of the natural gas-fired power generation Platform.”
Daniel Gutierrez, Chief Executive Officer at Emerging America, said: "We are excited to partner with The Abraaj Group to generate enormous value for the Mexican electricity market. With this partnership we will have a meaningful impact on the local economy by generating savings to consumers and bringing more efficient technologies to the Mexican system, and enable a higher penetration of renewables into the generation matrix."
The Abraaj Group has comprehensive investment experience in the energy sector, having invested over US$ 1 billion across growth markets. In 2015, Abraaj partnered with the Aditya Birla Group to build a 1 GW scale solar energy platform in India, and in 2017, acquired a majority stake in Jhimpir Power, a 50 MW wind power project in the Jhimpir wind corridor in Southeast Pakistan. In September 2017, Abraaj announced a partnership with ENGIE Group to develop a wind power platform of over 1 GW in India.