The project sponsors are Endesa Internacional (EI), a wholly owned subsidiary of Endesa, S.A. of Spain, and Enersis, S.A., a Chilean electricity company that is 65% owned by EI. EI holds one of the largest market shares among private companies in five major Latin American countries, controlling 12.4 GW of installed capacity and serving over 10 million customers. To date, EI has invested in over 950 MW of generation capacity (including CGTF) in Brazil. Additionally, EI controls CIEN (transmission line company interconnecting Brazil and Argentina) and owns two distribution companies – Cerj (servicing Rio de Janeiro) and Coelce (off-taker of CGTF). The sponsors established a special purpose project company, Central Geradora Termeléctrica Fortaleza, S.A. (CGTF), to finance, own and operate the Project. EI holds 51% and Enersis 49% of CGTF, which is incorporated under Brazilian law. Expatriates from Spain and Chile manage CGTF.

The total project cost is estimated at about $250 million. The proposed IFC investment is an A Loan of up to $62.5 million for IFC’s own account, and syndication of up to a $112.5 million B Loan for the account of the participants.

62.50 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	62.50
Equity

* These investment figures are indicative

The project is located in the industrial park adjacent to the Port of Pecém, in the municipality of Caucaia, state of Ceará, Brazil. The state of Ceará is promoting the industrial park in Pecém which is expected to include various projects, such as a steel plant, a petrochemical plant, a regasification plant, power plants, and warehouses. Existing industries in the industrial park include a 200 MW simple-cycle gas-based power plant, which is presently completed. The project is strategically located at the load center, represented by the industrial park and by the metropolitan region of Fortaleza, one of the fastest growing cities in the northeast Brazil. It is in close proximity to the Guamaré-Pecém gas pipeline, and about 2 kms away from the grid at 230 kV Cauipe substation of CHESF.

Environmental, social and health and safety issues reviewed include:

- Endesa’s corporate capacity to review and manage the project in accordance with IFC’s environmental
and social safeguard policies,
- natural environment (air quality, water supply and liquid effluents, noise, land use, soil and biological resources, visual resources, traffic and transportation),
- health and safety (public health, worker safety and fire protection),
- socio-economic (public consultation, cultural resources, community development, local employment),
- global environment (generating efficiency, greenhouse gas emissions),
- alternative analysis (site, fuel, generation technology, air emission control technology, cooling system technology), and
- impacts of associated facilities (the transmission line and gas pipeline connections including possible land acquisition or economic displacement).

Location of environmental documents in locally affected community
The environmental documents will be made available at the following location: Endesa Fortaleza Rua Adolfo Pinheiro 176 Bairro Dionisio Torres CEP 60120-040 Fortaleza, Ceara Brazil

The project is expected to have significant developmental impacts in that it will help to address a key developmental and strategic priority of both the GOB and the World Bank. The project will provide reliable and environmentally sound additional thermal power generation capacity to the poor northeast region of Brazil, the region that is heavily dependent on one river – São Francisco river – and was the worst affected by the 2001 energy crisis. Thereby, it will provide important system complementarities to the hydro-based system of the Northeast, and will help to reduce the risk of shortages, that have high economic costs. Moreover, the project will contribute to the economic growth in the Northeast in several ways: by bringing in and supporting foreign private investments; by creating about 1,200 jobs during construction; and by providing industrial and commercial customers with reliable capacity in a region that is extremely vulnerable to hydrological conditions. Finally, the project will be the first efficient combined-cycle thermal power plant in the state of Ceará (which currently imports electricity over a distance of at least 700 km, resulting in high transmission loss), and will cater to about 30 percent of the state’s current power demand. IFC will be playing a critical investment mobilization role in this project through the raising of an IFC “B” Loan from commercial banks of up to $112.5 million. In light of the extreme cautiousness among commercial lenders in Latin America, this is a significant amount of commercial financing for a project in Brazil (particularly in the Northeast) at this time, given the evolving regulatory structure in Brazil’s power sector, the continuing crisis in Argentina, and the continuing downturn of the power industry worldwide. By financing the TermoFortaleza project, IFC will be providing strong support to the Brazilian power sector following the recent energy crisis. In this regard, the GOB has been working to attract investments from major international power developers because it realizes that it needs the support of large, well-capitalized companies to ensure the success of this effort. In the context of the retreat from emerging markets of various power companies over the past 1 to 2 years, it is critical that debt financing be available to support those strategic sponsors still willing to invest in the sector in developing countries. IFC’s support of the Project will send a strong signal to the market that IFC will continue to support those international power companies that remain committed to investing in emerging markets.