IFC director for East Asia and the Pacific Javed Hamid said the loan, with a 12-year maturity period, signifies their commitment to "improving infrastructure in the Philippines with companies dedicated to good practices."
Cepalco officials said they applied for the IFC loan to partly cover the company’s $20.5-million expansion program until 2008.
Hamid said IFC supports Cepalco’s growth plans "through a local currency financing that helps it make critical investments in its distribution network."
Cepalco chief operating officer Consuelo Tion said the power utility firm intends to modernize its distribution facilities to meet the increasing demand in its service area.
"With the IFC loan, we can face the challenge of implementing our company’s plans and projects, and move on to greater heights," Tion said. Of its total capital expenditure program, Cepalco will provide the counterpart fund of $5.5 million.
Formed in 1961, Cepalco has been able to partly finance its network expansion through a combination of medium- and short-term financing of five years or less in maturity.
The country’s fourth largest private electricity distribution company, Cepalco serves nearly 92,000 customers in northern Mindanao. It has a peak demand of 113 megawatts (MW), which represents about nine percent of the total electricity demand in Mindanao.
Cepalco operates electricity distribution services in the city of Cagayan de Oro and the municipalities of Tagoloan, Villanueva and Jasaan, all in the province of Misamis Oriental in Mindanao, under an exclusive franchise awarded in 1961.
Its franchise has been extended for another 25 years starting in 2011. In 2003, the IFC also agreed to provide a $4 million loan for a 950-kilowatt solar photovoltaic power (PV) project in Mindanao undertaken by Cepalco.
The 950-kw PV project will be the largest distributed, grid-connected PV installation in the developing world. Japan’s Sumitomo Corp. will be the turnkey contractor while Sharp Corp. will manufacture the solar modules.
Cepalco agreed to raise $1.4 million of the total $5.4 million required to complete the construction of the solar project. - with a report from Ted Torres