Announcement of Joint Financing for Power Interconnection in Colombia on November 27, 1968

• 1818 H STREET, N.W., WASHINGTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 Bank Press Release No. 68/63 Subject: Joint financing for power inter- November 27, 1968 connection in Colombia The World Bank and major supplier countries have agreed to provide $21.!.!- 111:tl·- lion in foreign exchange for a project to interconnect the four regional po:::er syt: ... terns of Bogota, Medellin, Ca~i and Manizales which supply about two-thirds of all power consumed in Colombia. The interconnection and integrated operation of the systems wi.11 reduce t!':~ ~::~d. for future capital investment in generating facilities by an estimated $130 million during the next decade. The countries which have agreed to participate with the World Bank in the financing of the project are Belgium, Canada, France, Germany, Italy, Japan, the ~ Netherlands, Spain, Sweden, Switzerland, the United Kingdom and the United States. The foreign exchange required will be provided jointly by the Bank and financial institutions in the participating countries in which substantial orders are placed. The Bank has approved a loan of $18 million. The amount of the joint loans from supplier countries will be known when contracts have been awarded after inter- national competitive bidding, but indications thus far are that at least $3.4 mil- lion will come from this source. If the amount of supplier financing proves larger, the Bank loan will be reduced accordingly. This is one of the three Colombian public utility projects for which joint financing by the Bank and major industrialized countries had been arranged. Foreign exchange amounting to $42 mil- lion was made available for water supply and power projects in Bogota earlier this year by the same method. \. The Bank loan will be made to Interconexion Electrica, S.A., a stock corpora- tion established i~, September 1967 to construct, own and operate the interconnected /more Bank No. 68/63-Colombia-Power 2 - system and also future generating plants and transmission lines to provide power t~ ~ the four systems. The shareholders of Interconexion are the regional power agencies in Bogota, Medellin and Cali and the national power agency, Electraguas, which sup~ plies power to Manizales. The loan will be guaranteed by the shareholders as well as by the Republic of Colombia. It will be for a term of 25 years, including 3-1/2 years of grace, with interest at 6-1/2%. The project consists of the engineering and construction of three double- circuit 230-kv steel tower transmission lines, having a total length of about 320 miles between Bogota-Manizales, Medellin-Manizales and Cali-Manizales. Four substations,.with appropriate auxiliary equipment, will be constructed at loca- tions suitable for linking up with the four regional power systems. Funds will also be provided fo:- !! ::tudy of accounting and pricing methods to assure a satis• factory pricing system for the sale of power, and for engineering studies of future investments in transmission and generating facilities of the interconnected system. The project is scheduled for completion in mid-1971 at a total cost of $29.6 million. Intercanexion will cover about $8 million of the costs from its own resources. The World Bank has assisted in financing power development in Colombia for • more than 15 years. Bank operations have been concentrated on the systems serving Bogota, Cali, Medellin and Manizales, which account for most of the country's economic activity; earlier Bank loans for these systems have amounted to $216 mil• lion. The systems, which are primarily hydroelectric, were developed in stages in accordance with the growth of demand in each area. By the early 1960s it became apparent that attractive future power developmentswould be relatively large for the individual systems, suggesting the desirability of interconnecting the systems to create a single market capable of absorbing large blocks of new power capacity. Subsequent studies proved that significant economies could be achieved by inter- counecting and integre.ling operation of the systems. Larger generating plants will have capital costs significantly lower than those which would be involved if the systems were operated independently; reserve capacity requirements will be much lower; better use will be made of water resources, which is of particular importance in Colombia where so much of the power is hydroelectric; and program• ing of future power development will be centralized. - 0 - •