Peru : IDB to Finance Loan for Ecuador-Peru Power Interconnection Project

The Inter-American Development Bank (IDB) has approved a US$125 million loan for a 500-kilovolt power line that will help Ecuador and Peru connect their electrical grids. The European Investment Bank is expected to contribute an additional $125 million to the project. The 544 km extra-high voltage line between the two countries will help strengthen regional energy integration and further progress on the Andean Electrical Interconnection System initiative.

The IDBs funds are for Ecuadors side of the new transmission infrastructure, consisting of 280 km of transmission lines and a new substation in Pasaje. From the existing Chorrillos substation north of Guayaquil, the section will run south to the Peruvian border. From there the line will continue for an additional 264 km to Piura, a stretch that will be financed by Perus private sector.

In Ecuador, the works will be owned and operated by Empresa Pblica Estratgica Corporacin Elctrica del Ecuador (CELEC EP). In contrast, the Peruvian section was bid out under a private concession contract that includes 30 years of commercial operation.

Trade in electricity between Ecuador and Peru is expected to increase significantly following completion of the five-year project. The interconnection will boost cross-border transmission capacity to 680 MW from the current 80 MW, making it easier for the two countries to exchange surplus electricity.

The new interconnection also marks a step toward the creation of a sub-regional electricity market within the Andean Regional Short-Term Electricity Market, which was established in the regulations of the Andean Community free trade area to facilitate electricity exchanges in the region. The project will also include technical training courses for women in the power transmission sector.

The $125 million loan is provided under the IDBs Flexible Financing Facility, which gives the borrower country the option to request modifications to the loans repayment schedule, as well as currency, interest rate, and catastrophe protection conversions. It has a 23-year term, with a 7.5-year grace period and a SOFR-based interest rate. Ecuador's state-owned power company CELEC EP will put up an additional US$13.62 million in local counterpart funding.