WASHINGTON, June 3, 2010 - The World Bank approved today a US$ 495 million loan to Brazil, in support of the Eletrobras Distribution Rehabilitation Project. The project will increase quality of service and operational performance of six state power distribution utilities located in Brazil’s poor North and Northeast regions. Approximately 3 million people in 118 municipalities, an area equivalent to Colombia and Bolivia combined, will directly benefit from improved power reliability.
“Eletrobras is a regional reference in generation and transmission. With this support from the World Bank, we will be able to further leverage the professional management of our power distribution companies,” said Acting President and Technology Director of Eletrobras, Ubirajara Rocha Meira. “This will certainly be an important reinforcement for us to perform the actions needed to strengthen these companies and improve the quality of service they provide,” he added.
Brazil represents approximately 40% of all electricity consumption in Latin America and the Caribbean. Eletrobras is the country’s state-owned power utility, which also controls the six federalized state distribution companies covered by the project in Acre, Alagoas, Amazonas, Piaui, Rondônia and the city of Boa Vista in Roraima. The states served by the companies have lower average per capita income than Brazil as a whole.
Due to the high costs of working in remote and rural areas and the predominance of poor consumers, the companies rely on significant federal support. Compounding this, the companies have a history of high losses and poor management. The non-enforcement of payment for electricity, including from large consumers have led to a downward spiral of under-investment in basic maintenance, leading to a poor quality service, with multiple and long power interruptions, for which consumers do not want to pay.
“The project will break this vicious circle and help remove an important bottleneck for social and economic development in some of the country’s poorest regions,” said Makhtar Diop, World Bank Director for Brazil. “Lack of reliable access to electricity has an especially negative effect on the poor. Beyond being a burden on households, it decreases business activity, job generation and public service delivery in a region that already faces other challenges such as lower per capita income and a difficult geographical context.”
The Eletrobras Distribution Rehabilitation Project aims to improve quality of service, reduce electricity losses and increase utility sustainability through more efficient collection policies in distribution and retail. This goal will involve the acquisition of goods, equipment, works and services for the reinforcement of the distribution networks, the implementation of advanced metering infrastructure and the modernization of the companies’ management information system. In addition, it will support institutional and operational capacity strengthening of the six distribution companies in areas such as performance-based management, management of environmental and social impacts, and community outreach.
A training and research center in the State of Acre, to be established under the project, will finance curriculum development, studies, training, scholarships and equipment for course design and delivery in areas of water resources and environmental management.
“The advanced metering infrastructure technology introduced by the project will reduce losses, especially among the larger and higher-income users. In addition, the project will include activities designed to reinforce, rehabilitate and expand the existing distribution grids. This will ensure fair and equitable charging for all, as well as better services and planning,” explained Leopoldo Montanez World Bank co-Project Manager. Jennifer Sara, World Bank Brazil Sustainable Development Sector Leader and also project co-manager, added that “the project will complement the technical interventions with social activities in low income areas, focusing on public consultations, participation and awareness building, to build on and sustain project outcomes.”
The World Bank has financed over $5.7 billion in energy sector projects in Brazil since 1949. This is a US$ 495 million, IBRD Flexible Loan (IFL) with a fixed spread option, payable in 13.5 years, including a 5.5 year grace period.