The Inter-American Development Bank today approved a $750 million loan to Venezuela for the construction of the Tocoma hydropower project that will contribute to meeting the country’s growing electricity demand in an environmentally sustainable manner.

The hydropower plant, whose total cost is $3 billion, will have an installed capacity of 2,160 megawatts. Its 10 generators will be placed in operation on a staggered basis between July 2012 and March 2014. The plant will be built, operated and maintained by CVG Electrificación del Caroní S.A. (EDELCA), a state company.

The IDB loan will finance engineering, administration, civil works, equipment, the associated transmission system and a sustainable environmental and social management plan.

When completed, the project will be the fourth hydropower plant functioning in the Lower Caroni River Valley, which provides 70 percent of Venezuela’s electricity supply. The IDB participated in the development of this energy system with a $500 million loan approved in 1993 to help finance the construction of the Caruachi project and a $350 million loan for an electric transmission system for the Guri hydroelectric plant.

The project benefits from previous experiences and best international practices for projects of this magnitude, including participatory mechanisms and public consultations, which contributed to the design of its environmental and social management plan.

The project will increase the supply of power to households and industry, improve economic competitiveness and contribute to economic growth through a power source that is more environmentally sustainable than existing alternatives.  Among the benefits of the Tocoma project will be a reduction in the emission of greenhouse gases through the displacement of current thermal electricity generation.

The IDB loan is for a 20-year term, with a nine-year grace period, at a variable interest rate. The Andean Development Corporation is expected to provide parallel financing consisting of two loans amounting to $300 million each.

In other action the Bank approved a $2.7 million loan for the development of the power sector in the country that will support the development of a new legal and institutional framework for the sector as well as administrative and organizational improvements for state-owned electricity companies.

The IDB is also preparing a separate, $14 million loan to Venezuela to support a program for comprehensive, sustainable management of the Caroni River watershed.