News Releases

Oct 16, 2009

Brazil's State of Minas Gerais to boost electricity services in 19 northwestern municipalities with help from IDB

$10 million loan will foster economic development, improve living standards and reduce poverty in an area that is home to 328,000 people

The Inter-American Development Bank approved a $10 million loan to help finance the expansion of electricity services in Brazil's State of Minas Gerais, fostering economic development, improving living conditions, and contributing poverty reduction in 19 northwestern municipalities.

The project will finance energy service coverage expansion by awarding incentives or contributions granted by the state and federal governments to the power company Companhia Energética de Minas Gerais Distribuição S.A. (CEMIG-D) to promote investments in transmission, rehabilitation, and expansion of the power distribution grid.

These incentives are needed because electricity rates in rural and low-income periurban areas fall short of covering basic infrastructure costs.

Although Minas Gerais is Brazil's third largest economy, its northwestern region, which is home to 328,000 people, remains fairly underdeveloped, largely due to insufficient infrastructure in the energy sector.

For example, many of the area's 480 large-scale, 13,000 mid-sized, and 1,000 small farmers—mostly grain producers—are forced to use diesel-powered irrigation systems for lack of adequate electricity services.

The Bank's funding will support plans to connect not only farmers, replacing diesel-based irrigation, but also rural and periurban homes under the Luz para Todos and Clarear programs executed by CEMIG-D.

Most of the funds will finance incentives for high- and medium-voltage transmission works, including expansion of three existing substations and construction of three new substations, 160 km of 138kV transmission lines, and 1,370 km of medium-voltage feeders.

In addition, the funds will finance incentives for investments including expansion of the power distribution grid to reach rural and periurban households, installation of distribution lines and meters, and installation in each household of four power outlets.

These investments will increase the distribution system's efficiency by lowering energy losses, ultimately helping to reduce greenhouse gas emissions.

The Bank's loan is for a 25-year term, including a two-year grace period, at a Libor-based variable interest rate. The federal and state governments will provide an additional $6.22 million in local counterpart funds for the project.

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