New fund for private electricity sector of Latin America and the Caribbean

(Caracas, February 7, 1994).— CAF made a US$25 million contribution to the Scudder Latin American Power Fund which makes high return investments in the independent electricity sector of the region.

The agreement was signed today in the CAF headquarters in Caracas by CAF President & CEO Enrique García, with the presence of Luis R. Luis, Scott Swensen and John Nofthrue, representatives of the firm Scudder, Stevens & Clark.

The basic objective of the Fund is to stimulate development and strengthen private electricity utilities. The Fund will invest in electric power projects in the private sector which sell electricity to industrial users and in transmission and distribution utilities, under long-term contracts.

Most of the investments will be through equity participation, even though other financial procedures can be used; all of which serves to develop capital markets.

The Scudder Fund will initially have four partners with equity participation: in addition to CAF, two of the most important electricity utilities in the United States (CMS Energy Corp. and NRG Energy Inc), and the International Financial Corporation, multilateral organization of the World Bank group, whose objective is to stimulate the economic growth of its member countries by promoting private investment.

Benefits for Latin America CAF is formed by the five countries of the Andean Group: Bolivia, Colombia, Ecuador, Peru and Venezuela. Its shareholders include Mexico and Chile, and in the near future Trinidad and Tobago.

The CAF member countries are making important efforts to increase the supply of electricity by correct selection of sources and improvement of levels of efficiency.

During the signing of the agreement, the CAF president said the Scudder Fund had undoubted advantages for the Andean countries. "It is an effective mechanism for generating external funds and investing them in projects in the electricity sector, considered priority by the Corporation given their importance in the scheme of economic opening adopted by the Latin American nations."

García said the scope of the field of action of the Fund - Latin America and the Caribbean - was in line with CAF policy in the sense of "establishing effective and pragmatic communicating “vessels” which contribute to continental integration," as well as paying "more attention to the needs of a renewed productive base and improving the quality of life of the population by privatizing electricity utilities.”

He added that CAF’s direct presence on the board of the Fund and evaluation and approval of the projects to be financed would increase the possibility of attracting investments into this sector, because access to credit by private promoters is difficult if done in an isolated way.

The US partners NRG Energy Inc is a subsidiary of Northern States Power Company, which serves three million commercial, industrial, municipal and residential customers in five states. It has managed construction of 22 thermal plants, three repowering projects, two nuclear plants and various hydroelectric plants.

NRG is an independent power generator, specializing in design, construction, operation, maintenance and ownership of power plants.

CMS Energy Corporation operates in 12 countries, including Ecuador, Colombia and Argentina. It has over 100 years of experience in the electricity and gas area.

The Fund will be managed by Scudder, Stevens & Clark, an investment and management service company founded in 1990.

This firm specializes in managing asset investment for pension funds, foundations, corporations, and investment banks. Part of the investments managed are located in Latin America.