Announcement of Seven Million Four Hundred Thousand US Dollars Loan to Ceylon for Electric Power on July 17, 1958

FOR IMMEDtATE RELEASE' WOIILD • , INTERNATIONAL BANK FOR \ RECONSTRUCTION AND DEV1::.LclPfV1ENT ·:::i 1818 H STREET, N.W., WASHINGTON 25, D. C. TEL;FHONE: EXE'CUTIVE 3-6360 (! PRESS RELEASE NO. 545 SUBJECT: $7.4 million loan to Ceylon July 17, 1958 for electric po~~r __ ) The World Bank has approved a loan equivalent to ,$7.4 • million to . Ceylon. r·1 The funds will help to . finance a thermal power project to increase the sup~~ies of power in southwestern Ceylon, which is the center of economic activity and contains nearly half the count~'s·population. Ma,nufactur~rs ':['rust Company anc1 the Bank of America will participate in the ' . ' ,"" • ,IJ • •• loan, without the World Bank's guara11.te~, to the extent of $717,000, representing the first five maturities which fall due between November' l, 1961 and r.rove:mber 1, (\ The project for which the Bank's loan is being made forms part of an inte- grated electric power system which is operated by the Department of Government Ele~ric Undertakings (DGEU). It consists of the construction of a 25,000- kilowatt thermal electric plant at Grandpass, a district of the city of Colombo, the capital. The transmission system will also be extended and distribution facilities in Colombo will be expanded. ,:::~;;;e area servec1 by OOEU covers about 3,500 square miles or about 15% of the total area of C,eylon, a.nd has a population of four million. The generating capacity of the electric power system is at present about 77,000 kilowatts, inclu- •. (! ding 25,000 kilowatts of capacity which a Bank loan of $19.11 million made in 1-954 , helped to finance. More hydroelectric capacity is projected for the system; in the meantime, however, the Grand.pass thermal plant will solve the immediate problem of bringint1 more power into the area. The plant will also be needed after more hydroelectric power is available 0because existing reservoirs do not have  t:_) \J - 2 .. "~ • enough ~ter to permit full operation of hyclroelectric plants during periods ot: low • water. The demand for power for commercial, residential ~d industrial use has been ,!I growing rapidly in Ceylon; in the: p~st six yea.rs power sales have increasecl at an i) '· ) . ·average yearly(trate of' 15t%. Consumer goods industries pfodu,cing for the domestic :market, together '\Tith the ~ovrth of urban centers accounts for a large proportion of the growing der.iand. Most of "ti;he remainder ,.is accounted for by the traclitional export ,industries -- tea, rubber ,~d coconut which together provide about 90% of Ceylon 's foreign exchange earnings • These industries are expanding their p1"'oc1uc- tion -- the output of tea, for example, has risen from ·about 317 million pounds in 1952 to about 398 million pounds in 1957 -- and require additionalopower for their ___ , plants, processin(\ ,_, in·:·part to replace high-cost diesel-generated power with power delivered frmn the grid. This changeo·ver will result. in ·a • " • 11 • ~ 30% • rec1uction in\ power · \,. • • costs for the tea factories alone, and will pereti.t them to reduce their imports of 'diesel fuel oil. Aclditional power should also make possible the establishment of small and medium-sized industries which the Government has been encouraging in recent yea.rs but which ha~ been held back by a shortage of an assured supply of power, The estimated cost of the Grandpass therrual project is $11.1 million. The Bank's loan will pay for imported equipment and services. T,he purchase of all major items of imported equipment and materials and the award of a.11 :major construction contracts will be on the basis of' international competitive bidding. The pciwer plant should be in operation by the beginnins of' 1962. The Bank loan will be for a term of 20 years and bear interest of 5-3/8i, includin~ the 1i commission which is allocated to the Bank's Special Reserve. Amortization will begin November l, 1961. The loan documents have been sent to Ceylon where they will be signed by the • Governor General. They will then be r~turned to Va.shin@on for execution by the W6rld Bank.