Announcement of 110 Million Dollars Loan for Electric Power in Mexico on December 15, 1965

I NTERNA-rIOI\J:AL Bl\NK FOF'( • RECONSTRUCTION AND DEVELOPMENT 1818 H STREET, N.W., WASHINGTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 Bank Press Release No. 65/67 Subject: $110 million loan for electric December 15, 1965 power in Mexico The World Bank today made a loan of $110 million to Mexico to provide the major part of the $145 million of external financing needed for Mexico's nation-wide 1965/66 electric power program. Mexico now has discussions under way with other countries, some at an advanced stage, for additional loans for the program. This approach for joint financing of large development projects is designed to increase the flow of funds from capital-exporting countries to the developing coun- tries. Loans from the countries joining the World Bank in providing this external • financing will be used primarily to purchase equipment from successful bidders in these countries under international competitive bidding. Demand for electricity in Mexico has increased at an average rate of 9.5 percent annually since 1960 and is expected to continue to grow at a high rate. The program ,, for the two years,J965/66 is focused mainly on expanding electric power transmission and distribution facilities to meet the rapidly rising demand and to make more ~,ffec- tive use of generating capacity~ It includes the completion of construction of generating plants with a total generating capacity of 865,000 kilowatts, the start of new plants to be d,mpleted after 1966, the building of about 1,800 miles of .trans- mission lines and associated substations, the expansion of distribution networks and the first phase of a frequency standardization program. The total cost of the project is estimated at the equivalent of approximately $300 million, of which about half is • being provided by Mexico from internal sources •  • - 2 - 'l'tle Bank loan was made jointly to the Federal Electricity Commission and. Nacional Financiera, S.A. and carries the guarantee of Mexico. The Commission is an aµtonornous govertunent agency charged with the development of electric power in Mex:tco; Nacional Financicra is an official financing institution of the Mexi- can Government. Including the loan announced today, the World Bank has now lent a total of $606.3 million in Mexico, of which $365 million has been for electric power develop- ment. The loan signed today is the second largest development loan in the Bank's history, exceeded only by a $130 million ·power loan to Mexico in 1962. Since 1949, when the Bank made its first loan to Mexico's electric power sector, installed capacity has. almost quadrupled, from 1.2 million kilowatts to 4.6 million at the .,. end of 1964. During the past 15 years, the Bank, through its seven previous loans, has participated in financing more than three-fourths of the 3.4 million kilowatts that Mexico has added to its generating capacity, and, at the same time, has as"sisted in expanding Mexico's transmission and distrj.bution system. The $110 million Bank loan includes $89 million for procurement of equipment, abou.t $14.5 million for the estimated foreign exchange component of civil works, anrl about $6.5 million for interest during construction, consulting services, training, testing and special equipment. The loan is for a term of 20 years and tears interest at the rate of 5-1/2~ per annum. Amortization will begin in No..,ember 1969. •