US-based infrastructure investment fund Global Infrastructure Partners (GIP) and its co-investors have provided a $175m loan to Group Energy Gas Panama to support the acquisition and construction of a 670MW power plant in Panama, according to an official announcement.

The Generadora de Gatun (Gatun) natural gas cogeneration power plant will be developed in Colon, Panama. It is intended to improve power supply reliability by diversifying electricity sources for the power grid.

Group Energy Gas Panama plans to use the investment, as well as proceeds from senior debt and equity contributions, to fund the project’s estimated acquisition and construction costs, which amount to more than $1bn.

The company is a joint venture between InterEnergy and The AES Corporation.

Upon completion, Gatun is expected to become Panama’s largest and most efficient combined-cycle gas turbine (CCGT) power plant.

GIP credit partner Steve Cheng said: “The Gatun power plant is well-positioned to meet growing industrial power demand in Panama and is expected to play a key role providing stability to Panama’s electric grid considering the significant renewable generation sources already in place.

“The transaction is in line with GIP Credit’s strategy of investing in critical infrastructure with strong sponsorship.”

GIP provided the senior secured term loan to Group Energy Gas Panama through GIP’s Capital Solutions Fund II (GIP CAPS II), a part of the company’s Credit platform (GIP Credit).

The company said that the investment represents GIP CAPS II’s third commitment.

In a separate development, GIP and its co-investors have invested $500m in renewable power company BrightNight.

BrightNight aims to provide power solutions by combining renewable technologies.

Last August, GIP acquired Mexican power producer Saavi Energía from global sustainable infrastructure investor Actis for an undisclosed amount.

Saavi is Mexico’s fourth-largest independent power producer and largest privately held standalone power generator.