MHI signed agreements with AES Energia Cartagena S.R.L. of Spain on November 2003 under which MHI will invest in an IPP (independent power producer) project being undertaken by the AES Corporation, a leading global power company based in the U.S.A. MHI's investment will be approximately 500 million Japanese yen. MHI has many good track records on power plants for IPP; however, this marks MHI's first equity participation in an overseas IPP project. In future, in supplying equipment to overseas IPP projects, MHI will develop its business by participating in the development and equity investment in IPP.

AES Energia Cartagena S.R.L., a special-purpose company (SPC) established by AES, will commence selling electricity to the Spanish wholesale 'pool' market from February 2006. That is when its 1,200MW (megawatt) gas turbine combined-cycle power plant, currently under construction by MHI in Cartagena in southeast Spain, will go on-stream.

In Europe, the number of power-generation businesses operated by foreign companies is increasing in line with liberalization of the power industry. The Cartagena project will be the first undertaking of its kind in Spain to be conducted by a non-European company.

IPP projects are mainly funded through project financing in which 20-30% of funding comes from capital investment and the remaining majority portion is acquired by placing the project itself as security for the investment. However, the entire scheme of such projects tends to be complex and diversified. The range of requisite contracts - project development contract, capital procurement contract, management contact, and engineering, procurement and construction (EPC) contract, for example - add to the complexity. MHI is therefore stepping up its efforts to attract orders from overseas by responding to increasingly diversified needs of the overseas market.

The Cartagena power plant order was awarded to MHI by AES in August 2003. MHI is to supply the main equipment: three gas turbines, three steam turbines and three heat recovery steam generators (HRSG). Mitsubishi Electric Corporation will manufacture three generators. Provision of other auxiliary equipment and installation and construction work will be performed by the Spanish engineering partner. MHI has also signed a long-term service agreement with AES Energia Cartagena S.R.L. under which it will conduct maintenance work on the gas turbines for a maximum duration of eight years after the plant goes into operation.