Announcement of Thirty-Four Million US Dollars Power Loan in Mexico on May 5, 1958

WORLD • INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT 1818 H STREET, N.W. 1 WASHINGTON 25,. D. C. TELEPHONE: EXECUTIVE 3-6360 PRESS RELEASE NO. 533 SUBJECT: $34 ·million electric May 5, 1958 power loan in Mexico The World Bank today ma.de a loan equivalent to $34 million for electric power expansion in Mexico. The loan will finance the foreign exchange costs of four major power projects which form part ot the current $250 million five- year expansion program of the Federal Electricity Conmission. The projects will provide additional electric power supplies to areas which include Mexico City, Gu~\~~e!1ara, Puebla a.nd Veracruz, as well as to the state of Sonora • • The Chemical Corn Exchange Bank, the Continental Illinois National Bank and Trust Company of Chica.go, and the SWiss Credit Bank} New York Agency, are participating in the loan, without the World Bank's guarantee, to the extent of $1,323,000. This represents the tirst three maturities which fall due between August l, 1962 and August 1, 1963. The loan was made Jointly to the Federal Electricity Conmission and to Na.cional Financiera ,, S .A. , and is guaranteed by· the Mexican Government. The Commission is an a.utonomus agency of the Government and owns and operates power plants which produce one-third 9f the electric power supply of Mexico. The Bank has made two pr:evious loans to the -comission, $24.1 million in 1949 and.; $29. 7 million in 1952. Nacional Financiera, S.A. is the official financing institution wiich is by law the sole agency for the negotiation and administration of external • loans on behalf of the Mexican Government • The rapid postwar expansion of the Mexican economy has been and continues to be dependent upon very large increases in electric power ce.pacity. The  - 2 - .Commission, a.long with Mexico's other producers of electric power, has taken a full share in these increases by means of successive expansion programs. 1952 ·the power plants of the Commission had a total capacity of 286,000 kilo- In • watts. Five yea.rs later this total had trebled, to 844 ,OOO kilowatts. Between now and 1962 the Commission intends to add about 770.,000 kilowatts of generating capacity; 413,6oo kilowatts of this new capacity will be installed in plants being built with the help of ·today's loan. The electric power generated by the Commission, whether distributed by private companies or directly to consumers by the Commission itself, has played a decisive part in the development of Mexico. In the Mexico City area, for example, where peak load in 19 58 will be almo.'lt 900,000 kilowatts a.n,d 'Where distribution to consumers is handled by the Mexicen Light and Power Company (Mexlight), a private company, the e o:mmission will supply 30% of the power. Power frora the Commission's plants has also played a large part in the great • increases of Mexican agricul·tural production in the past few years, by providing power for pumps used to irrigate previously arid lands and for new crop- processing plants in many parts of the country. The four power plants on which this latest Bank loan will be spent fit into the same general pattern. Although in Widely separated parts of the country, each of them will bring additional power to rapi~y developing areas, some industrial and some agricultural,, which are a.t present restricted in the consumption of electricity and which h~"i,e np reser,e capacity. The principal cities to benefit from the add1..tiona.l power include Mexico City, Guadalajara in the west, Guayma.s in the northwest, and Puebla and Veracruz in the east. It is expected that the extra power available from the four projects will be fully •• utilized by 1962. ******** ... f - 3 - • The projects consist of~ (l) The Mazatepec 156,000-kilowatt hydroelectric plant a.nd auxiliary works on the Apulco River in the State of Puebla. This new plant will serve the Mexico City area, the power being distributed by Mexlight. While draWing most of its power from i·ts own plants, Mexlight also purchases power Yholesa.le from the Commission's Miguel Aleman group of power stations, west of Mexico City. The new Mazatepec plant is located 125 miles east of the capital and will exploit the hydroelectric potential of the Apulco River, one of the few remaining undeveloped river basins of Mexico having an appreciable flow throughout the long dry season. A feature of the new power station Will be the construction of a thin arch dam 270 feet high, the first of its kind to be built i:._ • Mexico. The project also includes the construction of a new high voltage transmission line from Mazatepec to Mexico City. (2) The Temaxcal 154,000-kilowatt hydroelectric plant and auxiliary works on the Tonto River southwest of Veracruz in the Stat.e of Oaxaca. This new plant will use the hydroelectric potential of a 240- foot earth-fill da.m which was completed in 1955 to provide flood protection for the area. The reservoir is very large and can be operated for power production without reducing flood protection. The project includes the construction of two new transmission· lines, one 8o miles northwest to Tuxpango and the other 80 miles northeast to Veracruz. Most of the power will be sold for distri- butioD. in the a.rea by COtUpania Impulsora de Empresas.Electricas S.A., a private company which is a subsidiary of the American & • Foreign Power Company, Inc.; the remainder of the power Will be distributed directly by the Commission to large · industrial con-· sumers and to villages outside the Impulsora network .  - 4 - (3) The CUpatitzio 73,6oO-kilowatt hydroelectric plant and auxiliary works on the Cupatitzio River in the State of Michoacan.. • This plant will :further utilize the hydroelectric potential of the CUpatitzio Ri,rer just below the Cormnission's .El Cobano plant, which was built in 1954 with the help of a previous Bank loan. The water from the river, which rises in large mountain springs a.~d flows constantly throughout the yea:r, is already being used to tr~1sform a previously desert region into a rich agricultural area consuming some of the power from the El Cobano plant. Most of the power, however, now and in the future, is intended for sale to two dis- tributing companies, the Impulsora system of the American & Foreign Power Company serving the State of Guanajuato and the Chapala Company sy~tem, owned by the Federal Electricity Commission, which serves • Guadalajara, now the second city of Mexico. (4) The addition of a 30,000-kilowatt generator to the existing 25,000-kilowatt thermal-electric plant at Guaymas in the State of Sonora. The auxiliary works of this project include a new transmission line to the important agriculturaL center of Hermosillo. This extension of generating capacity will be of great a.ssistance to further development at both places • The port of Gua.ymas has become increasingly important in recent yeB.l·s as one of the principal export outlets for the produce, especially long-staple cotton, of the rapidly developing northwest coast of Mexico, and has developed into a large center for shrimp fishing and processing. The area around Hermosillo has been made richly productive by means of pump and dam irrigation and: requires constantly increasing • supplies of power to satisfy its needs. In this area distribution to consumers is handled directly by the Commission. ********  - 5 - • Today's loan brings the totaJ. of Bank lending in Mexico to $186.3 million, of which $124. 8 million has been for power development. It is estimated that these loans will have helped Mexico to add 1.3 million kilowatts to its generating capacity since 1950, when the total installed capacity was only about one million kilowatts. The loan of $34 .million is for a term of 25 years and bears interest at the rate of 5-3/81, per annum, including the 1% commission which is allocated to the Bank's Special Reserve. Amortization payments will begin in 1962, after a four-year grace period. After approval by the Bank's Executive Directors, the loan documents were signed by Raul Martinez Ostos, Assistant Director General of Nacional Financiera, on behalf of Nacional Financiera and of the Mexican Government, by Carlos Ramirez Ulloa, Director General, on behalf of the Federal Electricity Commission, • and by J. Burke Knapp, Vice President, on behalf of the World Bank • •