Milbank Represents Lenders in $665 Million Financing of Phase I of Los Ramones Natural Gas Pipeline in Mexico

In its latest large energy-based project financing, Milbank, Tweed, Hadley & McCloy LLP has represented lenders in a $665 million facility that will fund construction of a new natural gas pipeline system from nine interconnections at the Agua Dulce Hub in Nueces County, Texas to Mexico.

The 120-mile Agua Dulce Pipeline – named for the hub location in Texas – will carry natural gas  from Agua Dulce to the U.S.-Mexico border, interconnecting on the Mexican side of the border with Phase One of the Los Ramones Pipeline, which is being developed by an affiliate of Gasoductos de Chihuahua S. de R.L. de C.V.

When operational in late 2014, the pipeline is expected to transport more than 2 billion cubic feet of natural gas per day into Mexico.  MGI Supply Ltd., an indirect wholly owned subsidiary of Pemex Gas y Petroquímica Básica (“PEMEX Gas”), the Mexican state-owned gas company, has agreed to purchase this capacity pursuant to a long term firm gas transportation agreement.

The lender group advised by Milbank included:  The Bank of Tokyo Mitsubishi UFJ/Union Bank; BBVA/Compass; Crédit Agricole; ING Capital; Natixis; Nord/LB; Royal Bank of Canada and Santander.

The project’s owners are Houston-based pipeline operator NET Midstream and ArcLight Capital Partners, an energy-focused investment firm.

Milbank project finance partners Dan Michalchuk and Dan Bartfeld led the team representing the lender group, with assistance from senior associate Caroline Conway and associate Sean O’Neill.

“Agua Dulce is a terrific example of the changing face of energy infrastructure in the U.S.,” Mr. Michalchuk said.  “The boom in domestic shale production is projected to turn America into a net energy exporter in coming years.  This project reflects that trend and should be a key source of expanding delivery of U.S. natural gas into Mexico, which has huge energy needs.”

Mr. Bartfeld added, “The level of interest from so many international financial institutions to fund a cross-border pipeline illustrates the strong lending capacity for high-quality projects in energy transmission, especially with strong creditworthiness.”

Milbank has been active in other major natural gas projects in Mexico. In 2012, the firm represented lenders in financing a 237-mile transmission pipeline being laid in the Mexican state of Chihuahua, with a connecting point at the border.  The Chihuahua pipeline is also expected to bring U.S. supplies of natural gas to several Mexican states.

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