The Inter-American Development Bank today announced the approval of a $25 million loan to two private electricity distribution companies in Guatemala to expand service and improve reliability and efficiency of service in rural areas. The loan is the first to Guatemala processed by the Bank’s Private Sector Department.
The loan to Distribuidora de Electricidad de Occidente, S.A. (DEOCSA) and Distribuidora de Electricidad de Oriente, S.A. (DEORSA) will help finance a capital investment plan of $94 million for the period 2001-04.
Banco Industrial, Guatemala’s largest private bank, will provide $25 million in co-financing, while the two distribution companies will invest $44 million.
DEOCSA and DEORSA, both owned by Union Fenosa of Spain, were established in 1998 when Guatemala reformed its electricity sector under the Electricity Law of 1996, which separated distribution from generation systems and privatized the distribution service.
The IDB resources will enable the two private distribution companies to improve the reliability and quality of service to customers by meeting international standards, reduce technical and nontechnical losses, and increase the number of connections in rural areas in those cases not covered by the Rural Electrification Plan, a partnership of the public and private sectors that is being implemented by DEORSA and DEOCSA.
By improving the reliability and quality of service to customers located in isolated areas, the capital investment plan will promote economic activity and help reduce poverty, a strategic objective of both the IDB and the government of Guatemala