Announcement of Two Loans Totaling Seven and a Half Million Dollars for the Development of Electric Power in Nicaragua on July 8, 1955

J- 0 .I lt 't: HOLD FOR RELEASE INTERNATIONAL BANK FOR .RECONSTRUCTION AND DEVELOPMENT (WORLD BANK) 1818 H STREET, N.W., WASHINGTON 25, D.C. TELEPHONE: EXECUTIVE 3-6360 PRESS RELEASE NO. 409 FCR RELEASE 5:30 P.M. D.$.T. SUBJECT: Two loans totaling $7.S million '~c Friday, July 8, 1955 in Nicaragua. The World Bank today ma.de two loans totaling $7.5 million for the development of elect,ric' power in Nicaragua. The loans will help to finance the construction of a 30.,000-kilowatt thermal power plant in Managua, transmission lines to 15 outlying towns, and expansion of the distribution systems in Mans.gu.a and the towns. The project will double electric generating capacity in Nicaragua and help to • meet the,demands for power in the Managua and Pacific coastal plain areas., the most populous and productive in the country. One loan., for $7.1 million., was made to the Empresa Nacional Luz y Fuerza of Managua., an autonomous government-owned corporation., which supplies power to the 1, Managua area. The other loan., for $400.,000, was ma.de to the', Instituto de Fomento Nacional., an autonomous government agency, which provides financial and technical assistance~))f'or industrial and agricultural development. The Bank of' America or San Francisco is participating in the $7.l million loan., without the World Bank's guarantee, to the extent of $724.,000 rep;resent:i.ng the first five maturities £allii1:~"'.-due (~~i:- semi-annw.illy from bctober 1., 1958 through October 1.,. _]!~-..; --~ 1960. The $7.1 million l~n will pay for imported equipment, materials and ser:rlces needed by Empre~a to build the new power plant and transmission lines and to 0 expand ita distribution system in Mana,gua. The $400,000 loan will be re"9lent by Fqnen,to to small power distribut~rs -in the ' (', 1, outlying towns to defray the foreign exchange costs of, renovating and expanding their distribution systems. These 1;·· 1· ·., .. 2 - • . utilities will distribute mergy transmitt~~ from the new plant. The total cost of the work to be carried out with the help of the two loans is estimated at the equivalent of $19.8 million; the work is exp~cted to be cc;mipleted by the end of 1957. The Nicaraguan economy has been actively expanding in recent years with a consequent rise in the demand for power, especially in Managua and the surrounding area. Generating arrl distributing facilities have not kept pace with this demand and many industrial and commercial establishments have had to install their own diesel power units, which are costly to operate and maintain. This has curbed the expansion of existing industries and the establishment of new ones. I~ In September 19.53 the Bank made a· loan of $450.,000 to finance the addition of a .3,000-kilowatt diesel unit to the Managua power plant. as a stop-gap meas~~- It was then agreed that instead of adding diesel units when shortages of power arose, • · the Nicaraguan Government would engage consultants to study the country's ·ion g- e plans for providing additional capacity in the most economic range needs and prepa~·1 .form. Preliminary surveys indicate that Nicaragua has constderable hydroelectri9 ,, potential. It will take until 19.58, however., to obtain 3.-ll the data necessary t9 determine the feasibility of hydroelectrj.c developm~n=tf)~11d it would take until 1962 or 1963 to complete any hydroelectric project begun in .1958·. The consultants therefore" recommended that the thermal poweza project for which t oday 1 s loan was ma.§.e should be of 30,000 kilowatts, a ca:pa city which should be sufficient to meet tbe needs of the Mana gtU:l \and Pacific coast areas until 1963. ,7, The project marks the transition of the pOTAer industry in NicaragllB. from the phase of, scattered diesel plants to that of an organized power network with • facilities ca.pable of sat"is,fying an expanding market. In preparation for this new·· ,, pha.se., the administration of Empresa has been reorganized to enable th~ company to ',I )} .. 3 - ,• assume #eatly increased responsibilities, and a National Power Commission has been established to regulate power rates and administer other aspect~_pf the ..;:::;c?"'Y" '--,__ --~-~'·""-.'> ~-~-----_.:::::-:----' power industry. Both loans are for a term of' 20 years and bear interest of 4-3/1,% per annum, including the statutory 1% commission charged by the Bank.,, An1ortization will begin October 1, 19.58. The loans are guaranteed by the Government of Nicaragua. The Bank ha.s now made seven loans totaling $16. 7 million in Nicaragua. The earlier loans were two loans of $3.5 m:tllion each for highway construction, $1.2 million for the purchase of agricultural machinery, $.550,000 for the construc- tion of grain storage facilities and $4.50,000 for the diesel power Wlit in M'anagua. After having been approved by the Bank's Executive Directors, the loan docu- men:t,\s we.re signed by His Excellency, Dr. Don Guillermo Sevilla-Sacasa, Nicaraguan • Ambasi3~fior in the United States, on behalf' of the Government of Nicaragua, by Mr. Humberto Salvo, General Manager of Empresa Nacional Luz y Fuerza., on behalf of Empresa, by Mr. Alfredo Sacasa, General Manager of the Instituto de Fomento Nacional., on behalf of Fomento, and by Mr. Eugene R. Black, President, on behalf of the World Bank.