WASHINGTON, D.C., June 29, 2000— The first privatized power distribution companies in South Asia—Western Electricity Supply Company of Orissa Limited (Wesco) and North Eastern Electricity Supply Company of Orissa Limited (Nesco), both in India—will receive IFC loan guarantees of US$39 million equivalent in local currency.
The investment finances upgrading of electricity distribution in the state of Orissa, the second poorest state in India, where annual per capita income is less than $250 and fewer than 20 percent of people have access to electricity. This is IFC's first guarantee transaction of local currency loans in India, a mechanism that protects local companies against foreign exchange risks. BSES Limited, a leading private sector utility in India, serving the suburban Mumbai area, is the sponsor.
With the investment, Wesco and Nesco will improve the electricity distribution sector, including connections in rural areas, upgrading and expansion of power lines, new metering and installation of transformers, capacitors, and aerial insulated cables. The work will improve quality of supply and consumer services as well as economic and industrial activity.
The project will help to significantly reduce distribution losses over the next few years which could lessen the demand for power generation and decrease the emission of greenhouse gases.
Vivek Talvadkar, Director of IFC's Power Department, said the projects should encourage other Indian states and countries in South Asia to accelerate power sector reforms, privatize state-owned distribution systems, improve quality of service, and increase power connections to rural consumers. The strong commitment by the state government of Orissa and a strong cooperation between the Grid Corporation of Orissa, other state agencies, BSES Limited, and the World Bank Group, contributed to successful project structuring under difficult market conditions, he said.
The mission of IFC, part of the World Bank Group, is to promote private sector investment in developing countries, which will reduce poverty and improve people's lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, and provides technical assistance and advice to governments and businesses.
