Announcement of 5.6 Million Dollars Loans for Electric Power in El Salvador on December 17, 1970

- • INTERNATIONAL DEVELOPMENT ASSOCIATION 1818 H STREET, N.W., WASHINGTON 0. C. 20433 TELEPHONE: EXECUTIVE 3-6360 IDA Press Release No. 70/55 Subject: $5.6 million loan for electric December 17, 1970 power in El Salvador The International Development Association (IDA) has approved a credit equiv- alen! to $5.6 million for electric power development in El Salvador. The project will assure an adequate supply of power in San Salvador, the capital, and strengthen the transmission s,r?tem serving the eastern half of the country. El Salvador, the smallest and most densely populated country of Central America, is also one of the most industrialized. Industry has been expanding at an annual average rate of about 1~ and now contributes some 201 to gross 11 ', • national product. Major industries are vegetable oils, yarns and fabrics, cigarettes, beer and wheat products. In recent years a cement factory, fer- tilizer plant, an oil refinery, synthetic fiber plant and a glass factory have started operation. Power consumption has been rising at an annual average rate of over 11% due both to industrialization and to rising domestic demand as service is expanded to reach more towns. The agency responsible for the development of electric power genera- tion and transmission in El Salvador Js Comision Ejecutiva Hidroelectrica del Rio Lempa {CEL) to which the Government will re-lend the proceeds of the IDA credit. The World Bank Group has long been associated with CEL. Between 1949 and 1963 the World Bank made four loans aggregating $25.4 mil- lion to CEL for its generating plant, which now totals 166 megawatts, and the construction of its transmission system. CEL now provides about 86?. of • /more IDA P.R. No. 70/55 - El Salvador-Electric Power • - 2 - the electric power generated in El Salvador and its interconnected trans- mission system extends throughout the country so that all cities and some 220 villages are now connected to the integrated networko Private power companies handle nearly all power distribution; the largest of these serves San Salvador} by far the most important consuming area. CEL is preparing a development program for the power sector, which may include utilization of geothermal resources now being surveyed with the assistance of the United Nations Development Programme. This program will not, however, be firmed up for another two years. The project being assisted by the IDA credit is an essential part of the program. It con- sists of the construction of a 33-MW gas turbine plant to ensure adequate standby capacity in the system, particularly for San Salvador, which is the dominant industrial, commercial and financial center • .\lso included is the construction of a 71-mile, 115-kilovolt transmission line connect- ing the cities of San Rafael Cedros and San Miguel which will be a con- • siderable improvement over the lower voltage lines now supplying the eastern part of the country. CEL will be responsible for execution of the project which is scheduled for completion in early 1973 at a total cost estimated at the equivalent of $7 million. The IDA credit of $5.6 million will cover the foreign exchange costs and the remaining costs will be financed by CEL from its own resources. The IDA credit will be extended to the Republic of El Salvador for a term of 50 years, including 10 years of grace. It will be interest- free but will carry a service charge of 3/4 of 1%. The Government will re-lend the proceeds to CEL for a term of 20 years, including 2-1/2 years of grace, with interest at 7-1/4%. - 0 - •