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IDB approves US$80 million loan to private company in Brazil for electricity distribution in the state of Tocantins

The Inter-American Development Bank announced today the approval of a US$80 million loan to Companhia de Energia Elétrica do Estado do Tocantins (Celtins) -the privately-held power distribution concessionaire for the State of Tocantins-- for an investment and refinancing program to improve and expand electricity distribution in central Brazil.

This project will help increase electricity coverage in Brazil. During the period 2006-2010, Celtins plans to improve and expand its electricity distribution system to provide electricity to new customers in rural and  urban areas, achieve productivity gains and reduce costs, and improve the quality and reliability of its distribution network system. The project will reduce electricity shortages and interruptions in Celtins distribution system and thus improve the living standards of the population.

The IDB financing includes an “A-loan” of up to US$60 million from the Bank’s ordinary capital and a syndicated loan, the “B-loan”, of up to US$20 million, consisting of resources from financial institutions that subscribe participation agreements with the IDB.

The shareholders of the borrower are Rede S.A. (70 percent) and the State of Tocantins (30 percent).

The amortization period is up to 9 years for the “A-loan” and up to 6 years for the “B-loan” with a three year grace period, at an interest rate based on LIBOR. Total project cost is US$246 million.

The IDB requires the highest environmental, social and safety standards and procedures for the project.

IDB participation in the project helps mobilize access to long-term financing from commercial banks and has an important demonstration effect on the viability of Brazil’s electricity distribution companies under the new electricity sector model.

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