Announcement of Mexico Develops Hydroelectric Power Resources on June 12, 1989

FOR IMMEDIATE RELEASE World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.* Telephone: (202) 477-1234 BANK NEWS RELEASE NO. 89/87 Contact: Ciro Gamarra (202) 473-8721 MEXICO DEVELOPS HYDROELECTRIC POWER RESOURCES WASHINGTON, June 12, 1989 -- Mexico will build two hydroelectric power plants in the central part of the country with the assistance of a $460 million World Bank loan. The $1.44 billion-project, to be carried out over seven years, includes the construction of a 960-megawatt (MW) plant at Aguamilpa, 40 kilometers (km) outside of the city of Tepic, and a 280-MW plant at Zimapan, 250 km north of Mexico City. A 187-meter rock-filled dam will be constructed for the Aguamilpa plant and a 200-meter concrete-arch dam for the plant at Zimapan. The project, which will diversify sources of power generation and promote efficient use of electricity, comprises a program designed to increase the capacity of the Comisi6n Federal de Electricidad (CFE) to construct and operate hydroelectric projects while minimizing the potential negative impact on people living near the dams. The construction of the Aguamilpa dam will require the resettlement of about 1,000 people, while the Zimapan dam will displace about 2,500 people. In accordance with Bank requirements, CFE will carry out resettlement plans in each project to ensure that the livelihoods of these people are protected, that they are compensated for belongings that might be lost, and that they are given land and new homes that will include infrastructure such as irrigation, roads, drinking water and sewerage, schools, churches, and health facilities. The National Indian Institute (Instituto Nacional Indigenista) will assist CFE in carrying out such plans and will monitor their execution. CFE will also carry out any actions required to protect the environment, to prevent the spread of diseases, and to safeguard any such ecological treasures that might be found. The Institute of Biology at the University of Mexico and the National Museum of Anthrolopology and History will assist CFE. The project also includes support for CFE in carrying out a program to increase the capacity of its staff to construct and operate future hydroelectric projects, with consideration for environmental concerns and for people affected by the projects. The program includes the development of guidelines and field manuals, purchase of monitoring equipment, and training of CFE personnel. Under the project, studies will be carried out on energy conservation and efficient energy use; cogeneration; and optimization of CFE's power system. Other studies on CFE's management and on electricity tariffs will also be done. -2- The project marks the first time the World Bank has been involved in Mexico's power sector since 1974. Before that time, the Bank participated actively in financing development of the sector with 11 loans totaling about $715 million. The World Bank loan, to be guaranteed by the Government of Mexico, was made to Nacional Financiera which will in turn lend the proceeds to CFE. The balance of project costs will be provided by CFE ($733 million), the Government of Mexico ($100 million), and by bilateral and suppliers' credits ($147 mil- lion). The World Bank loan is for 17 years, including five years of grace, with a variable interest rate, currently 7.65 percent, linked to the cost of the Bank's borrowings. It also carries an annual commitment charge of 0.75 percent on the undisbursed balance. NOTE: Money figures are expressed in U.S. dollar equivalents.