Announcement of Ninety Million US Dollars Electric Power Loan in Mexico on June 26, 1968

I' (') I f\tTE R ··R _____________________ ________________________ 1818. H STREET, N.W .• WASHINGTON ,.. D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 ... ··~------- Bank Press Release No. 68/33 Subject: $90 million electric .power June 26, 1968 loan in Mexico A World Bank loan of $90 million, together with an estimated $22 millio~ from major supplier countries, will help to finance Mexico 1 s continuing qation-wide elec- 1 tric power expansion program. Mexico's gross national product has been increasing at an annual rate of 6.5% in the past decade, with manufacturing growing at an even higher rate. An important element in this growth has been the availability of electric power. In the laat 18 years, electric generating capacity has been incr~ased nearly fivefolcf to 5.:,,700 ' ,:i I, megawatts and transmission and di~trihn~inn AYQ~OfflQ h•vo h~on g•e~~,y ovp~nn~rl- 411 Energy sales in 1967 increased by 11.giz and are expected to increase by 141 this year. Industry and commerce account for over two-thirds of power consumption. The Government, which now owns all public power facilities, has been carrying out a con- tinui.ng expansion program to keep pace with the demand. The financing announced today will be ~pplied to the cost::of the current e>'.:pansion program. The countries which have agreed to particip~te with the Bank in financing the ,.power program are Belgium, Canada, France, Gennany, Italy, Japan, the,,,Netherlands, Spain, Sweden, Switzerland,, the United Kingdom and the United States. The financing J ;;~ill be provided jointly by the Bank and financial institutions in the participating countries in ,·,:,hich substantial contracts are placed. The amount of loans from sup- plier countries will be known precisely only after contracts have been awarded after I international cotn,P:!litive bidding, but indications thus far are thatiabout $22 .mil- lion will-·'~.(wrii~ / '-· - · from <;1 this source. 4t This technique of financing was used in the Bank's last power loan in Mexico and also more recently for power and water supply projects in Colombia.. It / more  "" 2 ... provides a mechanism through which bilateral. export credits are used to finance goods procured under unrestricted internat.ional competition for projects prepared and executed under the supervision of the Bank. It also increases the flow of •• funds from capital-exporting to developing countries. The Mexican power market consists of ten major systems, as well as numerous isolated undertakings. The Central System, which serves the Mexico City region, is operated by the Compani.a de Luz y Fuerza del Centro whose stock is owned largely by Mexican public agencies; all other public power facilities are owned by the Federal Electricity Commission (CFE), an autonomous government agency. CFE pro-.· vides 74% of the energy that Centro sells. The program for which financing is being provided consists of the installation of new generating, transmission and distribution facilities in the major power systems, as well as a program for rural electrification, an\d the conversion of the system in th~ peripheral area of Mexico City from 50 to 60-cycle frequency, so that it will conform to the rest of the country. In the major systems alone this ln• volves tlie installation of some 3,200 megawatts of generating capacity and the in- stallation of over 1,900 miles of high-voltage transmission lines. Total capital investment during 1968 and 1969 will be equivalent to about $472 million. The Bank loan and joint financing will be applied to the foreign exchange cost of projects which were under construction on April 1, 1968 and those expected to start before April 1, 1969. Mexico will provide the equivalent of $270 million from the power sector's internal cash generation and from Federal and State Government contribu- • tions; it expectes to borrow the remainder. from other sources. The Bank loan will be made jointly to the Federal Electricity Commission and Nacional Financiera, S .A., an official financing i11stitution of the Mexican Govern- ment~ and will carry the guarantee of Mexico. The loan will be for a term of 20 years and bear interest of 6-1/41... Six fina11cial institutions have agreed to parti- cipate in the loan to the extent of $900,000 representin.g the fit·st maturity which falls due in June 1972. The participants will be Rheinische Girozentrale·' und Provinzialbank, Dusseldorf City National Bank of Detroit Girard ?rust Bank, Philadelphia The National Bank of C0tmnerce of Seattle United California Bank, Los Angeles The Ftrst Pennsylvania Banking and Trust Company 9 Philadelphia Including the loan announced today, World Rank loans to Mexico total $767 mil· lion, of which $455 million has been for the development of electric; power. Sint'e 1949 when the first Bank power loan was made, Bank funds have helped to finance the installation of more than three quarters of the increased capacity of 4,500 MW, and have contributed substantially to the expansion of the transmission and distribu- tion systems. • ... 0 ... .. .. '::