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IDB approves $40 million to support rural electrification in Chile’s disadvantaged regions

The Inter-American Development Bank today announced the approval of a$40 million loan to support rural electrification in Chile, using both conventional and nonconventional sources, in the three neediest regions of the country.

By the end of the project power supply will have been extended or improved in 36,600 residences, achieving the national goal of 90 percent electrification by 2006.

The project will finance incentives and inducements to attract private energy investments in rural areas that have previously been neglected because they were considered too remote and unprofitable.

For 8,300 rural residences that are outside the power grid, the program will finance self-generation of electricity for 4,500 new residences and improvement of electric power service to another 3,800 residences. Many of these homes are expected to receive nonconventional, renewable energy systems, powered by solar, wind and very small hydropower systems.

The incentives for private investors will be primarily distributed in the three regions with the lowest percentage of rural electrification coverage – regions IV (Coquimbo), IX (La Araucania) and X (De los Lagos).

The program will also strengthen programming, design, monitoring and evaluation of rural electrification projects and increase the management capacity of municipalities and regional governments in the electricity sector, as well as further the decentralization process.

The project will meet several objectives of the IDB’s strategy for Chile: increase competitiveness, reduce social and regional inequalities, improve the quality of life of citizens and modernize the state.

The loan is for a 20-year term, with a four-year grace period, at the variable interest rate for the U.S. dollar Single Currency Facility, now 5.51 percent. Local counterpart funds total $17.2 million.

The project will be carried out the Subsecretaría de Desarrollo Regional y Administrativo, with the support of the Comisión Nacional de Energía.

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