The Company is a joint venture between Inveravante Inversiones Universales S.L. (“Inveravante”, a Spanish company) with a 51% ownership, and Fundación Fernando Eleta Almarán (“Grupo Eleta”, a Panamanian entity owned by the local Eleta family) with a 49% ownership; together the “Sponsors”. It is envisaged that prior to closing of the financing, Inveravante's shareholding will increase to 65% of the Company, with the remaining shares being held by Grupo Eleta. Inveravante is a Spanish corporation founded in 2007 by well known entrepreneur Mr. Manuel Jové Capellán. Inveravante, a well diversified conglomerate, carries out its activities through two divisions: i) a financial investments division providing liquid assets and allowing for risk diversification; and ii) a “real sector” division which develops and manages a wide range of businesses in distinct sectors, in which Inveravante strives to maintain management control. Avante Genera, Inveravante’s energy arm within the real sector division has a sizeable pipeline of power projects in development stage, with focus on renewable energy generation (solar, hydro and wind). Grupo Eleta is a Panamanian private foundation created in 2003. The Group was founded by Mr. Fernando Eleta Almarán, a well known Panamanian business man and politician. Grupo Eleta’s main activities comprise: media, energy, real estate, and agribusiness.

The Project cost is estimated to be $291.7 million, of which $109 million will be in equity from the Sponsors, $153 million will be in senior debt, and US$30 million will be in subordinated debt. The Project is expected to be financed on a 63:37 total debt/equity ratio. IFC’s proposed investment consists of a $25 million A loan, a $ 15 million C Loan and an IFC Swap with an initial loan-equivalent exposure amount of up to $5.0 million.

45.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management	5.0
Guarantee
Loan	40.0
Equity

* These investment figures are indicative

The Pando project is located in the upper part of the CVR catchment area. The main dam of the project would be located about 4 km west from the city of Volcán, in the province of Chiriquí in Western Panamá. The Monte Lirio project would be immediately downstream of Pando. The Project includes the construction of two water conduction tunnels of 5.1 and 8.0 km (for Pando and Monte Lirio respectively), as well as a 19 km interconnection transmission line to an interconnection substation (to be built by the Company) with the Central American Interconnection System (“SIEPAC”).

Decreased emissions through the displacement of fossil-fuel powered generation: The Project will displace liquid fuel based generation that currently provides marginal pricing in Panama. This will help reduce local air pollutants (principally SOx and NOx), improve air quality for the local population, reduce global greenhouse gas emissions and contribute to climate change mitigation globally. The Project will also lower the cost of production in the Panamanian and regional grid by displacing more expensive diesel-fired generation Satisfying the growing regional power demand: Power demand in Central America is expected to grow at a compounded annual rate of around 4.1% in the coming years, resulting in large new power generation investment needs. The Project will clearly contribute to reduce the regional power infrastructure investment gap. Lower dependency on thermal power: The dependency on thermal generation in the Central American region has increased substantially since the 1990’s when most of the installed capacity was renewable (mainly hydro). Furthermore, a large component of the expected additional capacity to be constructed in the near term in the region is expected to be thermal. The Project will hence also contribute to reduce the region’s growing dependency on thermal power. Employment generation: The Project will generate direct and indirect employment in the Project’s area. During construction peak, it is expected that about 700 jobs will be created directly in connection with the construction of the Project. Additional employment will in turn help boost economic stimulus in the area.

Financial additionality: The Project is the Sponsors’ first major power investment in Panama and the region. IFC’s financial additionality could be broken down as follows: Long term financing: availability of long term financing for infrastructure projects in Latin America has proven to be challenging due to the ongoing financial crisis. IFC’s loans to the Project are envisaged to have a tenor of approximately 13 years. Debt mobilization: IFC has been instrumental in bringing together a consortium of lenders for the Project. Environmental additionality: IFC’s participation in this transaction and due diligence efforts will ensure that best environmental, social and health and safety (“E&S”) practices are applied to this Project. Due diligence efforts on this front include coordinating the preparation of a good hydro-biological and terrestrial baseline study prior to construction; monitoring the development and timely implementation of the environmental, social and health and safety management plans; and engaging the Panamanian Government to develop a Cumulative Impact Assessment (“CIA”) for all planned hydroelectric developments in the CVR.. Support private sector power development: By participating in this transaction IFC will be supporting a new private sector group in their first endeavor in the power sector in the region, potentially opening the door for further similar developments in Panama and other Central American countries. Technical Advice: Through our in-house and external technical and legal specialists, IFC has advised the Company through the negotiation process of the Project’s construction contracts.

The Project implies a fairly limited direct footprint, localized to the sites where the dams and power houses will be built and the approximately 18 kilometers of river where the natural water flow will be affected. The plants will be located in a steep canyon at the mid-upper basin of the CVR, where the area to be flooded is limited. The Project will not cause the physical displacement of people and the land acquisition involves only private owners. Purchase negotiations are quite advanced and no land disputes or issues are foreseen. The Project’s site is a highly intervened agricultural area, with limited-to-nil mature primary forest, and mostly composed of pastures, agricultural crops, and patches of secondary riparian forest and low shrubs.

However, the Pando daily regulation reservoir involves the construction of a mid-size-to-large reservoir. Additionally, during environmental and social appraisal site visit, the Company was in the process of consolidating the hydro-biological baseline of the CVR at the direct impact zone. Therefore even if the CVR is very intervened by human activity and it is unlikely to have any unique ecological characteristics or sustain the habitat of any particularly interesting or valued species, at the time of appraisal there was limited data to support the significance and permanence of any potential impact of the project on natural habitats.

Furthermore, Pando and Monte Lirio are two of a series of approximately 14 run-of-river hydroelectric developments with water concessions in the CVR basin. The significance and magnitude of the potentially accumulated impacts is currently been assessed. Therefore, given a certain degree of uncertainty associated to the potentially direct ecological impacts, and the likelihood that the cumulative impacts may be irreversible and may involve a complex mesh of stakeholders, this Project was classified as a Category A.

The Environmental Impact Assessments (“EIA”s) did not identify any significant environmental or social impact or issue that would require major management efforts, but outlined, however, a series of tasks that must be completed to appropriate dimension the impacts and risks, and design effective mitigation measures and plans thereof. Besides the typical impacts and risks associated with a new construction and civil works (e.g. air and noise emission, wastewater and solid and hazardous waste generation, etc – PS3), the main environmental and social impacts identified during the EIA process are: (a) modification of the hydrological and sediment load dynamics of the CVR, (b) potential negative impacts on aquatic ecosystem, including the potential net loss of species with particular water quality and flow needs (e.g. spawning, migration, visual feeders, etc), or the invasion of exotic species as a result of change hydrologic dynamic (e.g. free flowing vs still waters in reservoir), (c) potential increase in erosion processes due both the daily fluctuation associated with the Pando reservoir (up to 5 meters) and to increased access, construction activities, and human intervention, (d) potential negative impacts on terrestrial ecosystems as a result of the modifications on the CVR basin at the project direct and indirect impact area. (e.g. access roads, ancillary facilities, tunnels, transmission lines), (e) potential impacts on socio-economic dynamics in an economically depressed area of the country (e.g. initial increase of employment, attraction of migrant workers, increase public service needs and costs, etc), (f) potential impacts on touristic activities, such as rafting on the CVR, (g) potential impacts and risk associated to the construction of the tunnels and the operation of Tunnel Boring Machines (“TBM”s) and other heavy equipment and machinery (PS2), (h) socio-economic impacts associated with land acquisition and land-use changes thereof (PS5), (i) potential loss of archeological sites/ artifacts (PS8), (j) potential indirect impacts to indigenous peoples migrant crop workers, that have been reported to occasionally and in small numbers seek employment in the project influence area (see PS7 above), and (k) dam safety and emergency and community preparedness downstream (PS4).

The Company, in coordination with the Lenders, has developed a comprehensive plans of action to comply with all the environmental management tasks established in the EIAs and to meet IFC EHS Performance Standards as well as other Lenders requirements (See ESRS for further details)