CAF opens new sources of financing

In the interests of contributing to the normal operation of the electric sector and the development of the capital market in Colombia, the Andean Development Corporation (CAF) today approved, at its CVII board meeting, a Partial Credit Guarantee (PCG) for US$50 million for Chivor, the fourth largest hydroelectric generator in Colombia. Backed by this guarantee, Chivor will be able to obtain up to US$200 million in funds through bond issues on the domestic market.

The CAF executive president, Enrique García, said that Chivor can now access new sources of financing and improve the rating, term and rates conditions of the bond issues to be placed on the domestic Colombian market before the end of the year. The utility supplies 11% of the power generating capacity in the country.

As part of the financing scheme for the acquisition of Chivor, which was privatized by the Colombian government in 1997, CAF approved US$50 million of a US$400-million syndicated loan. The remaining US$350 million was provided by a group of banks led by Bank of America.

CAF’s decision to grant the PCG took into account the strategic public service that the applicant company provides to the Colombian people, and the significant impact on the Colombian capital market.

With this PCG, the bonds issued by Chivor – denominated in pesos – will obtain an AAA rating and terms of up to seven years. The electric utility will also obtain much higher amounts of new funds in local currency on better terms and conditions, which opens the way for the financial improvement of its liabilities. Thus, CAF is contributing to a secure electricity supply for the population, as well as to the development of a wholesale market and infrastructure for the country’s electric sector.

This is the second Partial Credit Guarantee the Corporation has granted to Colombia and the first operation of this nature made by a multilateral with a private sector borrower.

Last year CAF approved a PCG for US$100 million for the Republic of Colombia to back access to a syndicated loan for US$250 million for the country’s 2000 Financial and Investment Plan.

The Partial Credit Guarantee is a new financial instrument designed to help clients in shareholder countries to optimize the use of their resources while maximizing the Corporation's catalytic potential.