The Inter-American Development Bank today announced the approval of a $500 million conditional credit line to support the 2008-2014 investment program of Costa Rica’s state-owned utility, Instituto Costarricense de Electricidad (ICE).
With electricity demand forecast to grow at about 5.4 percent a year, Costa Rica will need to double its power generation capacity every 15 years. Just over the next eight years ICE should invest some $4 billion in generation, transmission and distribution.
The first $250 million loan from the conditional credit line approved by the IDB’s Board of Executive Directors will finance investments that will help ICE continue to provide high-quality, reliable and affordable services to urban and rural clients and ensure Costa Rica’s competitiveness.
The resources will finance preliminary studies for new hydroelectric and geothermal generation projects, the modernization of equipment at the Rio Macho hydroelectric plant and a program to dredge and restore the reservoirs of six hydroelectric plants to increase their productivity and extend their useful life.
Investments will also be made to improve power transmission and enable transactions among member countries of the Central American regional power market, such as building 230 KV circuits, upgrading transformers and substations, acquiring metering equipment and modernizing ICE’s energy control center.
Regarding electricity distribution and marketing, the program will finance investments to strengthen the urban power network and to add some 600 kilometers to the rural distribution grid. Photovoltaic equipment will be purchased to serve isolated communities.
ICE will also make investments to increase energy efficiency. It will establish a laboratory to test lighting, cooling and heating equipment and electrical motors and carry out a public lighting plan to replace outdated fixtures with more modern and efficient units. It will automate the meter reading of 15,000 rural clients and take steps to better manage waste at its sites.
Loans granted under the conditional credit line will be for 25 years, with a five-year grace period and a variable interest rate. Local counterpart funds for these investments will total $120 million.
In the future the IDB could complement the conditional credit line with a loan to ICE without a sovereign guarantee. It may also provide partial credit guarantees to support ICE debt issues in local or international capital markets.
The program with ICE also allows the IDB to comply with the goals of its Sustainable Energy and Climate Change Initiative, which was launched earlier this year to assist borrowing member countries in investments in renewable energy sources, energy efficiency programs, biofuel development and carbon financing.