Announcement of Three Million Dollars Power Loan in El Salvador on February 20, 1959

FOR IMMEDIATE RELEASE WORLD 1818 H STREET, N.W., WASHINGTON 25 1 D. C. TELEPHONE: EXECUTIVE 3-6360 Press Release No. 578 Subject: $3 million power loan February 20, 1959 in El Salvador The World Bank today ·made a loan of $3 million for the expansion of electric power facilities in El Salvador. The loan will help the Comisi,on Ejecutiva Hidroelectrica del Rio Lempa (CEL) to expand its generating capacity to 60,000 kilowatts and to widen its service area. The additional power is essential to meet the demands of El Salvador's growing economy and particularly of industry. Although El Salvador is predominantly an agricultural country, industry is beginning to have an important place. In the past five years about 100 new • industrial plants have been established and ·many existing industries have been expanded. Among the new industries are a 45,000-ton cement mill and plants for the production of soluble coffee, insecticides and fungicides, paint and varnish, textiles and shoes. This increase in industrial activity has helped to diversify and strengthen the economy. A large part of this development is due to the availability of a continuous supply of electric energy from facilities completed by CEL in 1954. CEL, the borrower, is a semi-autonomous government agency which sells power wholesale to private utilities and municipalities. At present all its power co·mes from the 45,000-kilowatt "5 de Noviembre" plant on the Rio Lempa. This plant pr.ovides nearly three-quarters of the country's entire generating capacity and supplies seven utility companies which together serve 95% of all electricity • consumers. In 1949 the Bank made a loan of $12.5 million to finance the foreign 1 exchange costs of building this plant with an initial capacity of 30,000 kilowatts and related trans-mission facilities. At the same time the Bank  - 2 - • assisted CEL t~ float its first internal issue of bonds which helped to pay the domestic costs of construction. With power demand growing at the rate of 15% annually, CEL in 1957 installed a third 15,000-kilowatt unit at the Rio Lempa plant and, to supple- ·ment storage in its reservoir, built a regulatory dam at the outflow of Lake Guija on the Desague River, a tributary of the Lempa. CEL financed this work by a second local bond issue. Today's Bank loan will help to finance the installation of a fourth unit of 15,000-kilowatts capacity at the Rio Lempa plant and the construction of a new high-tension transmission line from San Salvador, the capital, to Santa Ana, El Salvador's second largest city, a distance of about 40 milesa The expansion now being undertaken will enable CEL to meet the projected demand for power until early 1963 • • The estimat~d cost of the project, including additional work at the regulatory dam 1 is equivalent to $6.5 ·million, of which $4.7 million will be in foreign exchange . The Bank loan will cover part of the foreign exchange requirements and the remaining financing will be met from CEL's own resources and from a Government loan. The Bank loan is for a term of 25 yea.rs and bears interest of 5-3/4%, including the 1% commission which is allocated to the Bank's Special Reserve. Amortization will begin in January 1962. The loan is guaranteed by the Govern- ·ment of El Salvador. After having been approved by the Bank's Executive Directors, the loan documents were signed by His Excellency Dr. Hector Dayid Castro, Ambassador for El Salvador in the United States, on behalf of the Governr1e}1t of El Salvador, • and by Mr. Enrique LiIT-a, Managing Director, on behalf of the Comision Ejecutiva Hidroelectrica de1 Rio Lempa.