Announcement of the Ninety-Five Million Dollars Power Loan in Argentina on January 19, 1962

., ., I. ••• lf\JTERN AT·IONAL . BANK FOR 1 RECONSTRUCTION AND DE:V~LOPMEN1/ 1818 H STREET, N.W.> WASHINGTON 25, D. C. TELEPHONE: EXECUTIVE 3-6360 ."' !ank Press Release No. 62/2 SUBJECT: $95 million power loan January 19; 1962 in Argentina The world Bank today made a loan equivalent to $95 million to Servicios Electricos del; Gran Buenos . Aires (SEGBA) ,/ for the expansion of electric ·, power facilities in the Greater Buenos Aires area of Argentina. The loan will help to finance completion of the Gran Buenos Aires 6oq,ooo-kilowatt thermal p9wer plant, construction of a related high-voltage interconnecting ring 'in the metro- politan area, and expansion of--tlle disti·ibution system. The new facilities will eliminate the critical power shortage in-Argen- tina's most important industrial and commercial region. The area contains nearly a third of the country's populatf·<:>n of 21 million, and absorbs two- thirds of the country's total power supply. The shortage of pywer has become increasingly severe in Greater Buenos Aires during the last decade, limiting the ability of industnr and commerce to operate, much less to expand, thus n ((, creating a serious obstacle to economic recovery. For years the use of electricity has been sharply restricted and new customers have been 1lll&ble to obtain service. The peak output of 990,000 kil~:watts in 1900 was esti~ed to be about 300 ,ooo kilowatts below actual. requirements. That the shortage ls much larger is evidenced by the existence of some 500,000 kilowatts of generating capacity which has been installed in consumer-owned plants during • the past decade. ibe shortage of ·power is accentuated by the inadequacy of the transmission and distribution system which causes large losses of available pove,r.  0 In 1959-60 a comprehensive st1udy !I - 2 - of Argent'ina's power ,, needs ,wasr1 made to determine relative ,priorities and lay the basis for an orderly program of invest- • ~ment. The study ,was sponsored. by the Governmen~, financed by the United Natiop.s Special Fund, and carried out under the direction of the World Ba.i.i.k. Important conclusions wer~, that the greate,st need for P~i:;er was;. in the Buenos Aires ro:·ea and that the :r most efficient,, way to eliminate the shortage was the prompt com- 1'r (._\ I' pletion of the Gran Buenos Aires thermal power plant', l9cated in the city near (' 0 the main port area, Construction of' this plant and the interconnecting ring had been started tn 1958 by Agua y Energia E1~ctrica, ~ agencr of tl:le Argen- \\ ~ \\ tine Goyernment, but work has been seriously d.elayed because of a number of difficulties. SEGBA, formerly a foreign-owned utility company serving the Buenos 'Aires area, has now been acquired by the Argentine Government, but its shares are • being placed in escrow with the Industri.al Bank of Argentina to, be sold to local private investors as rapidly as conditions in the financial market will allow. In the m~anwhile it has been given a high degre~ of autonomy to con- duct its affairs in accordance with sounq public utility principles; it has a strong technical management as well as a good financial structure. SEGBA ,;_;<, is taking over fro~"Agua y Energia Electrica the Gran Buenos Aires plant, the interconnecting ring 81-ld additional distribution facilities in the Buenos Aires area, and is embarking upon the task of completing the major works which . have been begun, e~and.ing the distribution system, ~and adding a further 194,ooo kilowatts of Generating capacity to its existing Puerto Nuevo power plant. With these properties, in addition to its present facilities, SEXJBA will be • ~he largest electric utility in Argentina, and one of the larg~st in Latin America. .. . - 3 - The total. cost of SEGBA~s current expansion program is estimated at the equivalent of $292 million. The Bank loan of $95 ,,million will provide $6o million toward the local currencf costs of completing the Gran Buenos Aires th~rme.l plant, '-~~:c tf·// and the interconnecting ring including seven substations in the metropolitan area,. The remaining. $35 million of the loan wi'll cover the cost of :i.mported e(}lfipment for the distribution system and other foreign exchange rErquirements. SEGBA .will itself provide the equivalent of about $109 million from internal resdurces; the ·"' remaining costs ~e being met by other foreign borrowing amounting to the equi- valent of $76 million ( mainly existing British equipment credits), and issues of shares of $12 million. All the equipment for th~ p6wer plant and the inter- connecting ring has been ordered; the imported equipment for the distribution system will be purchased on the basis of international competitive bidding. Th~ Bank loan is for a term of 25 years and bears interest of 5-3/4'1, per . \\ annum including the l'f, commission which is allocated to the B~'s Special Re- serve. Amortization will begin March 1, 1965. The loan is guaranteed 'by the Argentine Republic • •