Announcement of Joint financing in Colombia on May 29, 1968

• I' -~i ; ~., ,. 1818 H STREET, N.W., WASHINGTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 Bank Press Release No. 68/28 Subject: Joint financing in Colombia May 29, 1968 The World Bank and major supplier countries have agreed to provide the equi- valent of,$42 million in foreign exchange for projects to increase the supply of water and of electric power in Bogota, the capital of Colombia, and the country's main commercial and industrial center. The installations to increase the water supply are part of a long-range program to eliminate the water shortage which the city has experienced since 1963. The new power facilities will increase generating capacity of the systP.M serving the Bogota area by about 451 • • The countries which have agreed to participate with the World Bank in the financing of these projects are Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Spain, Sweden, Stilitzerland, the United Kingdom and the United States. The foreign exchange required for the projects will b~ provided jointly by the Bank and financial institutions in the participating countries in which substantial contracts are placed. Small orders for imported goods, and orders placed outside the participating countries, will be financed wholly by the.Bank. These joint financing arrangements provide a mechanism through which bilateral export credits will be employed to finance goods procured under unrestricted international competition for projects prepared and executed under the super- vision of the Bank. They will also enable the Bank to participate in more projects in Colombia than would otherwise be possible. • In promoting joint financing arrangements for these two projects, the World Bank is helping to discharge its responsibility as Chairman of the Consultative / more r;ar::e ress 11..e 1 ease • •-, 1 :_} .1. T) • i.!o. / ')/,") Dt' r, d:, May 29, 1968 - Colombia. - 2 - Group for Colombia. The Consultative Group, in which almost all of the countries ~ listed above are members, is giving financial support to the Colombian development. program, for which the equiv<1lent of about $300 million is beir1g provided from external sources in 1968. The Bank has approveu two loans aggregating $32 million for the projects. The amount of joint loans from supplier countries will be known when contracts have been awarded after international competitive bidding, but indications thus far are that at least $10 million will come from this source. If the amount thu~ provided is larger, the isank loans will be reduced accordingly. The local currency costs, expected to be equivalent to $35 million, will come from Co lom~·i_an sources • With these loans, Bank lending in Colombia will reach $500 million, making • it the Bank's fifth largest borrQwer, after India, Japan., Mexico and Brazil. Bank Loan of $18 Million for Electric Power The Bank loan of $18 million for electric power will be for a term of 20 years, including a 3-1/2-year grace period, with interest at 6-1/47.. The loan will be made to Empresa de Energia Electrica de Bogota (EEEB) and guaranteed by the Republic of Colombia. This will be the third Bank loan to Empresa; the earlier loans totaled $67.6 million. The Bank has assisted in financing power development in Colombia for more than 15,.years. Bank operations have been concentrated on the four systems serving the major cities of Bogota, Cali, Medellin and Manizales, which account for most of the country's economic activity. Altogether the~e four systems pro- duce about two-thirds of all the electric power generated in Colombia. Colombia now plans to interconnect the systems, thereby achieving important economies: for example, larger generating plants will be justified for the interconnected system with capital costs significantly lower than the sum of similar invest- ments required if the systems were operated independently; reserve capacity re- quirements wi.11 be much lower; and programming of future p9wer development will be centralized. The project being assisted by the loan announced today is in- cluded.in plans for the interconnected system. EEEB's present generating capacity is 456 megawatts, most of which is hydro- electric. The latter consists of a series of plants along the' Bogota River a •. ,hort distance from the city. The new project consists of the installation of three SO-megawatt units at the Colegio hydroelectric plant to bring it to its final capacity of 300 megawatts, and the co11Struction of the SO-megawatt Canoas plant which will complete the series of plants on the Bogota River. In addition to generating power, the Canoas plant will control the supply of water for the 11 . I more I .J Ban1.c Press Release No. 68/28 May 29, 1968 - Colombia - 3 - rest of the plants along the river. EEEB's transmission and distribution systems will be expanded, and street lighting will be installed to seive the rapidly ex- panding urb~n area. The total cost of the power project is ei11timated at the equivalent of $43.7 million, of which $2S million will be required in foreign exchange. EEEBJs sound financial position will enable it to provide the local currency required for the project as well as to cover interest on the foreign exchange loans. Bank Loan of $14 Million for Water Supply The loan for the water supply project in an amount equivalent to $14 million will be made to Empresa de Acueducto y Alcantarillado de Bogota (EAAB), a public entity responsible for water and sewerage services in Bogota. the loan will be for a term of 20 years, including a 4-1/2-year grace period, and bear interest of 6-1/4%. It will be guaranteed by ColQmbia. annually The population of.Bogota has been growing at a rate of r,./over the last decade and has now reached two million. With this fast growth, demand for water has ex- ceeded the supply, and there has been an increasing water shortage since 1963. Be- cause of the st~cture and condition of the distribution system, the shortage is felt particularl';,~ln the highly populated and indU$trial southem sectors of the city. A safe and ample water supply will not only provide benefits directly re- • lated to this service, such as health and fire protection, but will also give essential support to the further expansion of Bogota's industry and coamerce. Consultants have prepared a long-range master plan for the Bogota water supply and the project now being financed is the first step in this program. It will increase the supply from S.S to 8.S ml/sec., or S54&. While this will not meet the existing deficit plus the expected increase in demand, the project ->is the only one ready for construction at the present time. Its main effect will be to keep the water shortage within certain limits until 1973, after which subsequent in- stallations should gradually reduce the shortage and eliminate it by 1977. l'unda from the loan will finance the preparation of some of these future projects. The present project represents a duplication of an existing supply scheme, known as the Tibito system. This scheme uses water from the Bogota River at an intake some 22 miles north of the city. Without requiring construction of new dams or other intake works, the water supply will be increased by an expansion of the pumping.treatment, transmission and distribution facilities. The major ele- ment is a 40-mile transmission and distribution pipeline with a 78-in~h diameter. In order to improve the BAA.B's operation, the project will include the purchase .of maintenance and other equipment, such as that for consumption and wastage control. the total cost of the water supply project is estimated at the equivalent of $3S.3 million, of which $17.3 million will be required in foreign exchange. ·\\Local currency expenditures will be met by EA..\B from its own cash generation, local'\\ bor- rowing and government contributions. The financ;ial position of the BAAB, showing • a low debt/equJty ratio, is sound and the recent water tariff increaae of about 80%. should enable BAAB to earn ·a reasonable return and thus to provide for an adeq_uate contribution to future expansions. In 1967, BAAB underwent a major reorganization and has improved its -:~ement and administration. - .0 -