Ternium SA and Tenaris SA have entered into a memorandum of
understanding with Tecpetrol International SA to jointly build
and operate a natural gas-fired electric power plant in
northern Mexicos Nuevo León state.
The plant will supply
energy to both Ternium and Tenaris, which have steelmaking
operations in Mexico.
Ternium will own 48 percent of the joint venture, called
Techgen SA de CV, while Buenos Aires, Argentina-based Tecpetrol
will hold 30 percent and Luxembourg-based Tenaris the remaining
Techgen, which is
estimated to cost about $1 billion, partially financed with
debt, is expected to be operational in the fourth quarter of
2016 with a power capacity of between 850 and 900 megawatts.
"The memorandum of understanding contemplates, among other
things, that Techgen would enter into power supply and
transportation agreements pursuant to which Tenaris and Ternium
would contract 22 percent and 78 percent, respectively, of
Techgens power capacity," the companies said.
The power plant will
be built in the Pesquería area, where Ternium has been
completing the installation of a 1.5-million-tonne-per-year
cold-rolling mill and a 400,000-tonne-per-year hot-dipped
galvanizing mill in a joint venture with Japans Nippon
Ternium has Mexican
capacity to produce 3.9 million tonnes of crude steel and 7.1
million tonnes of finished steel annually, while Tenaris can
produce more than 1.2 million tonnes of seamless steel pipe per
year at its TenarisTamsa subsidiary.
Both companies have
been mulling crude steel expansion projects based on
direct-reduced iron (DRI) units fed by natural gas.
Ternium has recently
suggested that it was getting closer to such an expansion,
while TenarisTamsa had previously said that a DRI project
involved negotiations with the Mexican government to secure the
supply of natural gas from state-owned oil giant
Petróleos Mexicanos SA de CV.
Tecpetrol, a company
operating in the energy sector in the Americas, is a wholly
owned subsidiary of Curaçao Netherlands Antilles-based
San Faustín SA, the controlling shareholder of Ternium
power plant will "contribute to the long-term competitive
position of our industrial activities and strengthen
Mexicos electricity system," Paolo Rocca, Terniums
chairman and Tenaris chairman and chief executive
officer, said in a statement. "The recently announced energy
reform would enhance the benefits of this significant
Enrique Peña Nieto earlier this month presented a
proposal for a major energy reform aimed at opening up the
industry to private capital.
A version of this article was first published by AMM sister
publication Steel First.