Announcement of Ten Million Dollars Loan to Empresas Electricas Asociadas, Peru on August 12, 1966

). 1818 H STREET, N.W., WASHINGTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 Bank Press Release No. 66/45 SUBJECT,~ $10 million power loan to August 12, 1966 Empresas KL.ectricas Asociadas, Peru The World Bank today made a loan equivalent to $10 million to Empresas El.ectricas Asociadas (Lima Light & Power Company) of Peru. This is the third Bank loan to Empres~s and will help finance the e~ansion o:f its transmission and distribution system. '.l:he two previous loans, one of $24 million in 1960 and a second of $15 million. in 1963, asi sted expansion of the company• s power generating capacity and its distribution network. The projects assisted are nearly completed and 240,000 kilowatts have been added to the company's generating • capacity at the Hu:inco hydroe+:~r.tric plant alone. Seven financial in sti tut ions are participating in the loan, without the World Bank'~ guarantee, for a total of $5ex>,oeo, representing the first three maturities which will fall due between December 1, 1969 and December l, 1970. \) The particip_ants are The American Express Company, Inc., New York; Continental Illinois Bank & Trust Company of Chicago; Morgan Guaranty Trust Company of New York; Crocker-Citizens National. Bank, San Francisco; Bank of N9.rth Ameri,ca, New York; The First Pennsylvania Banking & Trust Company, ·Philadelphia; and The Northern Trust Conpany, ~cago. In addition, Mellon National Bank & Trust Company has agreed to purchase out of the Bank's portfolio an amount of $100,000 of the maturity which will £all due on September 15, 1969 of a previous Bank loan to Empresas. • Fmpresas El.ectricas is privately owned and serves the Greater Lima-Callao a.rea, which has the highest concent:ration of population and industry in Peru. J:...t the end of 1965 the area had about 2,800,000 inhabitants, representing over  - 2 - 24 per cent of the country's total population. Over half of the sales by Empresas are to industrial and commercial consumers. Among the nearly 7,CXJJ industries in the area served by the company are cement, rubber goods and metal • products manufacturers, along with textile,. paper, vegetable oil, fertilizer, fish meal and other plants. In 1962, the company's service area was some 200 square miles (515 1an2). It has since increased to about 700 square miles (over 1,800 1on2). The Peruvian Government recently authorized a further exten- sion which will bring the total area served by Empresas Electricas to over 1,000 square miles (2,800 1an2). Increasmg population, ·residential development., establishment of new industries and the expansion of the service area have contributed to a power demand which has g~own by an average of 10 per cent annually during the past 20 years in the Greater Lima area. Similar increases are expected to continue for the next several years. 'Ihe company now has an installed generating capa- • city of 435,000 kilowatts, equivalent to 85 per cent of the total private power capacity serving the public. To meet. rising demand., E)npresas has been carrying OU:t a long-range expan- sion program· since 196o, ad~g about 280.,000 kilowatts of new capacity and extending its transmission and distribution syst,t~. The project currently wider consideration is designed to increase the capacity of its transmission and distribution system to meet the demands ,;1'.f the power market and ·to transmit the greatly increased power generated. The project consists of the construction of high voltage transmission lines and substations, and the installatiot: )Of over- head lines, underground cables and transformen-s for the distribution system. The Bank's loan will help to finance this work and will also provide funds for the _purchase of needed equipment for new service connections, meters and modem communication equipment to improve operations control and customer service. •  - 3 - The cost of the proj'9Ct is estimated at the equivalent of $22 million. The Bank loan of $10 million will cover foreign exchange requirements, or about 45 per cent of the total. ihe balance will be provided by &n.Presas with /J funds from its operati()ns., other borrowings and customers• contributions for s.ervice connections. The Bank loan is £or a tem. of 20 years and bears interest of 6 per cent per annum. Amortization will begin December 1., 1969. The loan is guaranteed by the Republic of Peru. With the fin.9tlcinf_iapproved today., the Bank has made 20 loans to Peru, totaling $201.4 million. Besides assisting the power sector., Bank funds have helped fi;nance highway and port, construction and maintenance., railroads., land '·~; • settlement and irrigation., and agricultural. credit programs. The loan is the first made by the Bank in Peru., in the context. of the Consultative Group which was established at a meeting in Paris on July 21 and 22 • It is ·expected that the borrowing program elaborated by the Peruvian Government £or the Consultative Group will provide the framework for future . . Bank lendmg in Peru • •