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IDB to finance construction of Chaglla hydropower plant in Peru

$150 million loan will help Peru to diversify its energy matrix, meet rising energy demand and reduce its carbon footprint

The Inter-American Development Bank (IDB) approved a $150 million non-sovereign guaranteed loan to help finance the construction of a 406-megawatt hydroelectric plant in Peru, a project that will help the country meet growing demand for energy while helping to diversify its energy matrix and reduce its carbon footprint.

The Hidroeléctrica de Chaglla project will be the country´s second largest hydropower power facility, representing about 13 percent of the country’s installed hydropower capacity once construction is completed by 2016. The plant is expected to prevent greenhouse gas emissions of approximately 467,000 metric tons of carbon dioxide equivalent annually.

“This project will make a significant contribution to Peru’s economic development,” said Esteban Sarzosa, the project team leader at the IDB’s Structured and Corporate Finance department. “It advances the delivery of environmentally responsible and socially sound infrastructure by incorporating sustainable solutions such as biodiversity conservation, local employment and capacity building”.

The IDB loan will be granted to Empresa de Generación Huallaga SA, a subsidiary of Odebrecht Energia SA, both of which are part of Brazil’s Odebrecht Group. Drawing from its successful experience in Brazil, Odebrecht will implement an innovative professional training program, known as “Creer Peru”, for local communities in areas related to civil construction.

The training program aims to give employment priority to local communities that lack qualified labor. It is designed to offer qualification programs for the Peruvian workforce in technical areas related to civil construction including carpenters, electricians, masons, welders, etc. Once certified, many of the participants are hired for Odebrecht construction projects. The skills they acquire are universal and can be helpful in seeking employment opportunities long after the construction phase of any particular project is complete.

The IDB loan will also help finance the construction of related infrastructure, including the transmission line linking the plant to the national electricity grid, access roads and other ancillary facilities. The plant and related infrastructure will be on the Huallaga river in the Chaglla and Chinchao districts of the department of the Huánuco.

The total cost of the project is $1.2 billion. The IDB loan (A loan) is expected to be coupled with a syndicated B Loan from international commercial banks for a total IDB A/B loan of approximately $400 million. Additionally, it is expected that Banco Nacional de Desenvolvimento Econômico e Social (BNDES) will be participating in the long-term debt package with a parallel loan of $323 million.

About the IDB's Structured and Corporate Finance Department

The Structured and Corporate Finance Department (SCF) leads all IDB's non-sovereign guaranteed operations for large-scale projects, as well as those linked to companies and financial institutions. Through its Loan Syndication Program, SCF acts as a catalyst, helping to engage third-party resources by partnering with commercial banks, institutional investors, co-guarantors and other co-lenders for projects with high developmental impact.