Announcement of Bank lends Seventy-Nine Million Five Hundred Thousand Dollar in Brazil on February 26, 1965

',' .. INTERNATIONAL BANK FOR • RECONSTRUCTION AND DEVELOPMENT 1818 H STREET, N.W .. WASHINGTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 Sank Press Release No. 65/9 Subject: Bank lends $79.5 million February 26, 1965 in Brazil The World Bank has approved two loans totaling the equivalent of $79.5 mil- lion for the development of electric power in Brazil. The loans, the first the Bank has made in Brazil since 1959, are for projects that will add nearly a mil- lion kilowatts to generating capacity in the south-central region, the industrial heart of Brazil. A loan of $57 million is being made to Central Eletrica de Furnas, S.A. (FURNAS} for the construction of the 800,000-kilowatt Estreito hydroelectric plant • on the Rio Grande; four units with a combined capacity of 533,000 kilowatts are to be installed initially. The second loan, of $22.5 million, is being made to Usinas Eletricas do Paranapanerna (USELPA) for the completion of the 400,000-kilowatt. Xavantes hydroelectric power plant already under construction on the Paranapanema River. Grace National Bank of New York and Meadow Brook National Bank, New York are participating in the USELPA loan, without the World Bank's guarantee, for a total amount of $200,000 representing part of the first maturity which falls due in May 1970. Stockholms Enskilda Bank is participating in the FURNAS loan taking a por- tion of the first maturity which falls due in July 1971. FURNAS and USELPA supply power wholesale in the south-central region which includes the cities of Rio de Janeiro, Sao Paulo and Belo H.orizonte and contains over 40% of the country's population. Industry uses over 75% of all the electric • power produced in the region. The electricity supply comes from a large number of  - 2 - plants, mainly hydroelectric, built by Federal, State or private companies, which now have a total capacity of 4.4 million kilowatts. The World Bank already has lent $208 million for the development of electric power in this region. • The Brazilian Government, with the assistance of consultants working under a United Nations Special Fund grant for which the World Bank is Executing Agency, has been making an intensive study of the power market in the region for the past two years. They estimate that demand will continue to grow at the long-term his- toric rate of 10 to 11% per annum. To meet the demand through 1970, a short-term emergency program has been prepared, calling for a doubling of power output by that time. The Estreito and Xavantes developments are of high priority within this program. The execution of the program will be considerably facilitated by power rate policies being put into effect by the Government of Brazil to enable • power companies to earn a satisfactory return. $57 Million Loan to FURNAS for Estreito Project The Estreito project will continue the development of the hydroelectric potential of the Rio Grande, which forms the boundary between the States of Minas Gerais and Sao Paulo. A Bank loan of $73 million was made to FURNAS in 1958 for the Furnas hydroelectric plant with an initial capacity of 900,000 kilowatts; this plant is partly in operation and nearing completion. The Estreito plant will be located 100 miles downstream from the Furnas plant. The reservoir at Furnas is large enough to regulate the flow of water through long dry spells which characterize the region for plants downstream. The Estreito project is divided into two overlapping phases, both of which are to be finished at the same time. The Bank loan will be applied to the cost of the first phase which includes a dam 500 meters long and 80 meters high, a concrete intake structure and powerhouse on the left bank, a concrete spillway en the right bank, and the transmission lines necessary to connect the plant to •  I - 3 - • ,,,. the existing transmission network. The powerhouse will be designed to contain six generating units, of which four with a combined capacity of 533,000 kilowatts will be installed initially. The second phase comprises a second transmission net- work to connect the Furnas and Estreito plants to the principal consuming centers. The Estreito plant will be built and operated by FURNAS, a corporation estab- lished in 1957 and owned principally by Centrals Eletricas Brasileiras S.A. (ELETROBRAS), a Federal Government holding company. The project being assisted by the Bank loan should begin operatiotL in 1969; it is scheduled for completion early in 1971 at a total cost estimated at the equivalent of approximately $90 mil- lion. The Bank loan will cover $57 million of the total. The remaining costs will be financed by FURNAS and ELETROBRAS. With the exception of the civil works, 1 which are not being financed by the Bank loan, and spare ' parts for existing equip- • ment and minor items, all major equipment, materials and services will be obtained on the basis of international competitive bidding. For the first time in the case of a World Bank loan to Brazil, Brazilian firms will participate in the inter- national bidding for contracts being financed by the loan. The Bank loan will be for a term of 25 years and will bear interest at the rate of 5\% per annum. Amortization will begin in July 1971. The loaPwill i be guaranteed by the Government of Brazil. $22.5 Million Loan to USELPA for Xavantes Power Project USELPA was organized in 1953 as an autonomous power agency of the State of Sao Paulo to develop and operate the hydroelectric power potential of tae Paranapanema River, which along a course of 181 miles has a potential of a mil- lion kilowatts. USELPA now has two plants in operation, both of which were fi- nanced in part by earlier Bank loans totaling $23.4 million: the 60,000-kilowatt • Salto Grande plant which began operations in 1958 and the 85,000-kilowatt Jurumirim plant which has been operating since 1962.  r ! - 4 - The Xavantes plant will be located upstream from Salto Grande. Construction ~ inviblves diversion and intake tunnels, a dam 90 meters high and 430 meters long, 2n4 a powerhouse equipped with four 100,000-kilowatt generators. Also included is the construction of transmission lines to connect the new plant with the Sao Paulo system. Xavantes has been under construction for several years; the diver- sion tunnels are finished and the spillway is partly built. It is scheduled for completion early in 1969. The total cost of the project is estimated at the equivalent of $69.5 million. The Bank loan will provide $22.5 million of the total and the State of Sao Paulo, USELPA 1 s principal shareholder, will provide whatever funds are required for com- pletion of the project. Equipment, materials and services still required will be obtained on the basis of international competitive bidding,, with the exception of • civil works and minor items. The Bank loan is for a term of 25 years and bears interest at the rate of 5\% per annum. Amortization will begin in May 1970. The loan is guaranteed by the Government of Brazil. •