Japan International Cooperation Agency (JICA) has signed a loan agreement with Companhia de Eletricidade do Estado da Bahia (Coelba), which operates a power distribution business in northeastern Brazil.
The initiative is co-financed by MUFG Bank and Brazil’s National Bank for Economic and Social Development (BNDES). It is JICA’s first co-financing with MUFG, which serves as a lead arranger of the transaction. BNDES is a member of the International Development Finance Club (IDFC), with which JICA is also affiliated.
Coelba is a distribution subsidiary of Neoenergia, which serves more than 34 million people, and is one of Brazil's main private electricity companies. Spanish company Iberdrola holds a 50% plus one share in Neoenergia, while Brazilian pension fund Previ holds 32.9 %. The remaining 17.139% comprises the free float on the Sao Paulo Stock Exchange.
According to a stock exchange filing by Neoenergia, JICA is providing around US$100 million of ten-year debt while MUFG is extending US$50 million for five years.
Coelba will use the financing for its capital expenditures in 2021 and 2022, particularly on distribution network expansion and maintenance projects.
The loan is JICA's first financing for infrastructure development in Brazil‘s electricity sector, and reinforces Neoenergia's strategy of diversifying funding sources, attesting to its wide access to finance at competitive costs and terms.
Coelba operates in the northeastern state of Bahia under a concession licence from the Brazilian government. Coelba has been providing power distribution services in Bahia for more than two decades and has more than six million customers.
The current project will provide financial support to Coelba for the construction of power distribution facilities, which will help to replace diesel and other fossil fuels with renewable energy in areas not connected to the power grid, while helping to conserve energy by lowering power losses.
The aim is to contribute to the attainment of the United Nations' Sustainable Development Goals 7 (affordable and clean energy) and 13 (climate action).
JICA notes that there is a large income disparity in Brazil, with a poverty rate of 12.1% in the relatively developed south and 43.6% in the poorest northeastern region (about 25 million people). Of the 1.25 million people not connected to the power grid, most are located in the northeast. In the state of Bahia, the largest northeastern state, there are 215,000 people with no access to electricity.
Brazil's energy mix includes 73% renewables, mainly hydropower, but in unelectrified areas, people have no choice but to use coal and firewood for cooking and diesel generators and kerosene lamps for lighting. This situation puts pressure on the household budgets of the poor, emits greenhouse gases, and affects vegetation, as well as raising concerns about safety and health, such as household fires and air pollution.