The IDB will grant a loan of USD 125 million to Ecuador for the electrical interconnection with Peru

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The new transmission infrastructure will strengthen regional energy integration. The credit must be paid in 23 years

The IDB will grant a loan of USD 125 million to Ecuador for the electrical interconnection with Peru

The Ecuadorian section of the electrical interconnection infrastructure will be financed by an IDB loan.

The Inter-American Development Bank (IDB) will finance the electrical interconnection from Ecuador and Peruwith a 500 kV line. The project will receive financing of USD 125 million from the IDB, the EEmpresa Pública Estratégica Corporación Eléctrica del Ecuador (CELEC-EP) will contribute USD 13.62 million and the European Investment Bank (EIB) is expected to contribute another USD 125 million.

This IDB financing is a loan to Ecuador that is registered in the modality ofFlexible Financing Facility. This form of loan, according to the IDB, “offers the recipient country the option of requesting changes in the repayment schedule, currency conversion, interest rate, and protection against catastrophes.” The term for the payment is 23 years, but Ecuador will have a grace period of 7 and a half years.

The interest rate for this loan will be based on the SOFR (Secured Overnight Financing Rate), which is a rate based on repurchase agreements, that is, transactions for overnight loans, secured by US Treasury securities.

The IDB will grant a loan of USD 125 million to Ecuador for the electrical interconnection with Peru

The loan granted by the IDB may be canceled within a period of 23 years. (REUTERS/Carlos Jasso)

According to the IDB, the new transmission infrastructure will strengthen regional energy integration and promote the development of the Andean Electrical Interconnection System (SINEA) . This system seeks to guarantee “the obtaining of benefits in economic, social and environmental terms that can lead to the optimization of its energy resources and to the security and reliability of the electricity supply”, according to information from theAndean Community of Nations (CAN).

In addition, the main purposes of the Andean Electrical Interconnection System are to implement mechanisms to facilitate legal certainty and guarantees for the development of infrastructure and international electricity transactions, according to the CAN website. The project also seeks to identify the necessary infrastructure to establish an electrical energy corridor, within the countries and in the border area, as well as to advance in specific bilateral agreements that define the commercial and financial exchange mechanisms of electricity.

The new electrical interconnection line between Ecuador and Peru will have a 544-kilometre extra-high voltage line between the two countries. The Ecuadorian section, which the IDB will finance, has 280 kilometers of transmission lines and a new substation in Pasaje, 126 kilometers from Guayaquil.

According to an IDB statement, the section will start from an existing substation in Chorrillos, north of Guayaquil, and run south to the border with Peru, where the project will continue for an additional 264 km to Piura. This last tranche will be financed by the Peruvian private sector.

The Strategic Public Company Corporación Eléctrica del Ecuador (CELEC-EP) will own the work and will also operate the new infrastructure. On the other hand, in the Peruvian section, the tender was made under the private concession model, which includes 30 years of commercial operation.

The IDB will grant A USD 125 million loan was granted to Ecuador for the electrical interconnection with Peru

The IDB has reported that the establishment of a subregional electricity market will be promoted within the framework of the Short-Term Regional Andean Electricity Market (REUTERS/Daniel Tapia)

The electrical interconnection project will last five years and the IDB It expects that “the electric power traded between the two countries will increase substantially as transmission capacity increases, from the current 80 MW to 680 MW, favoring the exchange of surplus electricity between the two countries.”

With this interconnection, the IDB has reported that the establishment of a subregional electricity market will be promoted within the framework of the Andean Regional Short-Term Electricity Market (MAERCP). This is a figure established in the regulation of the Andean Community, which seeks to facilitate electricity exchanges in the region.

That the IDB grants a loan for the electrical interconnection project is not a surprise, since the CAN has informed that the activities related “to the elaboration of the regulation of said Decision are supported by the Inter-American Development Bank (IDB), as well as the studies of the bilateral interconnections, within the framework of the System Initiative Andean Electrical Interconnection (SINEA) whose objective is to achieve full regional interconnection.”

In addition, as part of the project, a series of technical training courses will be developed for women in the transmission sector.