Environmental Review Summary
Project Number
10471
Company Name
COMPANIA DE ALUMBRADO ELECTRICO DE SAN SALVADOR, S.A. DE C.V.
Date ERS Disclosed
Mar 20, 2001
Country
El Salvador
Region
Latin America and the Caribbean
Environmental Category
B - Limited
Status
Completed
Previous Events
Approved : Jun 14, 2001
Signed : Dec 17, 2001
Invested : Dec 20, 2001
Sector
Distribution Business
Industry
other
Department
Regional Industry INF LAC & EUR
Project Description
The Project involves a loan of approximately US$110 to US$140 million to Salvadorian distribution companies AES CAESS, AES EEO and AES DEUSEM (as defined below hereinafter referred to as the "Companies") to expand service to rural areas, improve system reliability and reduce losses.
Background
El Salvador privatized its distribution network in February 1998 through a competitive bidding process. Two electricity distribution companies, Compañía de Alumbrado Eléctrico de San Salvador, S.A. de C.V. ("AES CAESS"), and Empresa Eléctrica de Oriente, S.A. de C.V. ("AES EEO"), were awarded to Corporacion EDC ("CEDC"). Subsequent to the award, CEDC transferred its ownership in CAESS and EEO to El Salvador Energy Holdings ("ESEH") and sold 50% of its interest in ESEH to Reliant Energy International, Inc. ("REII"). In June 1998, CAESS purchased a majority interest in Distribuidora Electrica de Usulutan, S.A. de C.V. ("AES DEUSEM"). Based on the AES Corporation''s ("AES") successful tender for shares of CEDC in June 2000, AES now owns approximately 87% of CEDC outstanding shares. In addition, in October 2000, a wholly owned subsidiary of AES bought REII''s 50% share in ESEH.
Investment Requirements
AES expects to increase the sales of these three distribution companies through expansion of their networks and through the implementation of marketing programs which, over time, will increase average consumption per customer served. Additionally, by using installed electricity distribution and commercial infrastructure, AES expects to grow the companies'' revenues in non-core areas by taking advantage of new opportunities in telecommunications (e.g. pole rentals) as well as by providing billing and collection services for non-competing businesses such as water and trash collection.
AES foresees that substantial cost reductions can be accomplished at AES CAESS, AES EEO and AES DEUSEM through: (i) the installation of new meters and by implementing an aggressive meter verification/calibration program on existing installations; (ii) the upgrading of customer commercial systems; and (iii) improved working capital performance to be achieved through the increased use of automated meter reading, implementation of - on-site billing programs, introduction of direct debit and credit card payment options for customers and enhancement of credit and collection practices.
In terms of network expansion, the Companies plan to invest approximately US$59 million in their distribution networks in order to connect new customers, primarily rural households (60% of which currently lack access to electricity) and improve service for their existing customers. It should be noted that 64% of rural Salvadoran households lacking access to electricity are located in AES EEO''s and AES DEUSEM''s service territory.
To address issues of system reliability and loss reduction, the Companies expect to invest approximately US$40 million. AES CAESS requires repair and maintenance for approximately 10% of its primary distribution network and 15% of the secondary distribution network. The respective repair needs for AES EEO and AES DEUSEM constitute approximately 25% of their distribution grids, including replacement of damaged lines and the installation of new transformers and meters. To improve service quality and efficiency, the Companies also contemplate investments of approximately US$5.5 million into computers and information systems for the Companies.
Collectively, AES CAESS, AES EEO, and AES DEUSEM provide electricity to approximately 58 percent of El Salvador. AES CAESS is the largest of the three systems, serving 437,000 customers in an area of 4,281 km2. With the exception of 2 substations, most facilities were constructed prior to 1990 with many more than 30 years old. AES EEO is the second in size both in terms of customers and geographical coverage, serving 158,000 customers in an area of 6,212 km2. With the exception of the San Miguel area, the AES EEO service area is much more rural and was more affected by the conflicts that occurred in El Salvador from 1980 to 1992. AES EEO’s facilities are generally 10 years old. AES DEUSEM is the smallest of the three systems, providing electricity to 41,000 customers in an area of 1,129 km2. It principally serves residential customers in the department of Usulutan.
Background
El Salvador privatized its distribution network in February 1998 through a competitive bidding process. Two electricity distribution companies, Compañía de Alumbrado Eléctrico de San Salvador, S.A. de C.V. ("AES CAESS"), and Empresa Eléctrica de Oriente, S.A. de C.V. ("AES EEO"), were awarded to Corporacion EDC ("CEDC"). Subsequent to the award, CEDC transferred its ownership in CAESS and EEO to El Salvador Energy Holdings ("ESEH") and sold 50% of its interest in ESEH to Reliant Energy International, Inc. ("REII"). In June 1998, CAESS purchased a majority interest in Distribuidora Electrica de Usulutan, S.A. de C.V. ("AES DEUSEM"). Based on the AES Corporation''s ("AES") successful tender for shares of CEDC in June 2000, AES now owns approximately 87% of CEDC outstanding shares. In addition, in October 2000, a wholly owned subsidiary of AES bought REII''s 50% share in ESEH.
Investment Requirements
AES expects to increase the sales of these three distribution companies through expansion of their networks and through the implementation of marketing programs which, over time, will increase average consumption per customer served. Additionally, by using installed electricity distribution and commercial infrastructure, AES expects to grow the companies'' revenues in non-core areas by taking advantage of new opportunities in telecommunications (e.g. pole rentals) as well as by providing billing and collection services for non-competing businesses such as water and trash collection.
AES foresees that substantial cost reductions can be accomplished at AES CAESS, AES EEO and AES DEUSEM through: (i) the installation of new meters and by implementing an aggressive meter verification/calibration program on existing installations; (ii) the upgrading of customer commercial systems; and (iii) improved working capital performance to be achieved through the increased use of automated meter reading, implementation of - on-site billing programs, introduction of direct debit and credit card payment options for customers and enhancement of credit and collection practices.
In terms of network expansion, the Companies plan to invest approximately US$59 million in their distribution networks in order to connect new customers, primarily rural households (60% of which currently lack access to electricity) and improve service for their existing customers. It should be noted that 64% of rural Salvadoran households lacking access to electricity are located in AES EEO''s and AES DEUSEM''s service territory.
To address issues of system reliability and loss reduction, the Companies expect to invest approximately US$40 million. AES CAESS requires repair and maintenance for approximately 10% of its primary distribution network and 15% of the secondary distribution network. The respective repair needs for AES EEO and AES DEUSEM constitute approximately 25% of their distribution grids, including replacement of damaged lines and the installation of new transformers and meters. To improve service quality and efficiency, the Companies also contemplate investments of approximately US$5.5 million into computers and information systems for the Companies.
Collectively, AES CAESS, AES EEO, and AES DEUSEM provide electricity to approximately 58 percent of El Salvador. AES CAESS is the largest of the three systems, serving 437,000 customers in an area of 4,281 km2. With the exception of 2 substations, most facilities were constructed prior to 1990 with many more than 30 years old. AES EEO is the second in size both in terms of customers and geographical coverage, serving 158,000 customers in an area of 6,212 km2. With the exception of the San Miguel area, the AES EEO service area is much more rural and was more affected by the conflicts that occurred in El Salvador from 1980 to 1992. AES EEO’s facilities are generally 10 years old. AES DEUSEM is the smallest of the three systems, providing electricity to 41,000 customers in an area of 1,129 km2. It principally serves residential customers in the department of Usulutan.
