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| This Summary of Project Information is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. |
Summary of Project Information (SPI) |
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| Project number | 20361 |
| Project name | Tlalnepantla Municipal Water Conservation |
| Country | Mexico |
| Sector | Utilities |
| Department | Sub-National Finance |
| Company name | Tlalnepantla Municipal Water Conservation |
| Environmental category | B |
| Date SPI disclosed | January 7, 2003 |
| Projected board date | February 6, 2003 |
| Status | Completed |
| Previous Events | Signed: June 30, 2003
Approved: February 20, 2003 |
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| Project sponsor and major shareholders of project company |
A private Trust will be set up under Mexican laws in Mexico by Dexia Credit Local Agency New York (Dexia). The Trust will issue Certificados Bursatiles (CBs) in the local capital market. IFC will issue a partial guarantee for up to $3 million alongside Dexia, who will issue a letter of credit (LC), for up to $5.3 million, for the benefit of the CB holders to the Trust. The Trustee is Banco Santander Mexico S.A. The Trust will use the proceeds from the CBs to make a loan to the Municipality of Tlalnepantla de Baz, and its municipal water utility, to finance certain water conservation projects (see project section below). The Municipality will pledge property taxes and the municipal water utility will pledge its water fees to secure the loan from the Trust.
The project partner is Dexia Crédit Local, Dexia Crédit Local, The Dexia Group is among the largest financial groups in Europe with €350 billion in assets in 2001. Dexia Crédit Local, France, has assets of €138 billion and net income of €559 million in 2001. The main activities of Dexia Crédit Local include: medium and long term financing for public and local authorities; financing of public and private infrastructure concessions; and advisory services for these clients. Dexia has 42% of the French municipal finance market and is the leader in all Europe with 17% of market share. Following the acquisition of the US bond insurer FSA, Dexia has also become quite active in the US bond market. Dexia Crédit Local is rated internationally as AA/Stable/A-1 by S&P and Aa2/Stable/P-1 by Moody’s. Dexia with its experience in municipal finance markets in Europe, the US, and several emerging markets (mainly in Latin America and Central and Eastern Europe), is a valuable partner to IFC in the field of municipal infrastructure finance. |
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| Total project cost and proposed IFC investment |
The estimated project cost for the water conservation program, including financing costs, is $9.6 million. Of these, $7 million will go towards design and construction of the wastewater treatment plant; and $2 million for rehabilitation and maintenance of the water supply network to reduce water losses.
The project, which forms part of the Municipality’s investment program for the period 2000-2003, will be constructed over 18 months. The venture will be financed through a loan of $9.6 million (net of issue costs) to the Municipality from the private Trust, with Banco Santander Mexico S.A. as trustee.
The proposed IFC investment is a partial guarantee to be issued to the Trust on behalf of the CB holders for an amount not exceeding $3 million, for IFC’s own account |
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| Location of project and description of site |
| The poject is located in the municipality of Tlalnepantla de Baz, in the state of Mexico, close to the metropolitan area of Mexico City. . Tlalnepantla has a population of approximately 800,000 inhabitants, and is one of the most important municipalities of the state of Mexico accounting for 21.2% of the GDP of the state. The municipality has fifteen industrial zones operating in sectors such as chemical, machinery, metallurgy, textile and garments, food, paper and mineral products. |
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| Description of company and purpose of project |
The financing raised through the Trust for the municipality will be used for water conservation projects by the local water utility: Organismo Publico Descentralizado Municipal para la Prestacion de Servicios de Agua Potable, Alcantarillado y Saneamiento del Municipio de Tlalnepantla de Baz (OPDM). The project supports the efforts of the municipality’s public water utility (OPDM) to conserve limited drinking water resources and, at the same time, help clean-up the principal surface water – the Rio San Javier. The project consists of two main elements:
- construction and operation of a wastewater treatment plant to recycle currently untreated residential and industrial wastewater for reuse by industry, and
- survey and rehabilitation of the water distribution network to reduce physical and commercial water losses.
The venture is expected to have the following positive development impacts:
- provide economic benefits associated with the development of more efficient private capital markets in Mexico;
- create a financial instrument that would provide creditworthy municipalities with access to long term capital for essential infrastructure investments;
- increase living standards for Tlalnepantla inhabitants through efficiency and quality improvements in water and wastewater services; and
- improve quality and access of industry in Tlalnepantla to public services, thus, attracting new investors/businesses to the area.
The development impacts ascribed to the improvements in water and sanitation services include also health improvements and reductions in poverty levels, reduced child mortality rates, and improvements in labor productivity.
The project is consistent with the World Bank Group objectives, strategies, and sector priorities in Mexico. In particular, it supports
- infrastructure development critical to fostering an efficient and internationally competitive private sector and thereby attracting more foreign direct investment,
- environmentally beneficial projects that will have a direct and positive impact on the citizens of Tlalnepantla and promote sustainable development, and
- financial sector development including the use of private participation in municipal capital markets.
IFC Role
IFC’s participation in the project will satisfy the following roles: provide long-term financing - even if Mexico has enjoyed better access to capital following its investment grade rating, raising a $11 million long-term finance package for a municipality can still prove difficult; convey credibility given IFC’s multilateral status, its knowledge of sub-national infrastructure projects, local currency credit enhancement products and capital markets; (iii) the municipal bond market in Mexico and the introduction of new structures that use the municipalities own revenues to secure borrowings will contribute to development of the local capital market and municipal finance market in Mexico; finally and (iv) the Project, if successful, could be replicated in Mexico and other parts of the world. |
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| Environmental and social issues - Category B |
This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The review of this project consisted of appraising technical and environmental information submitted by the project sponsor, field visits to the area, and meetings with OPDM and other stakeholders. The following potential environment, health and safety impacts of the projects were analyzed.
- Water resource use and management;
- Drinking water quality;
- Wastewater reuse, water quality, and public health and;
- Employee health and safety.
To view the environmental documents for this project, click here
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| Location of environmental documents in locally affected community |
The Environmental Review Summary is available at the following locations: on the Municipality of Tlalnepantla’s web site
www.tlalnepantla.gob.mx and at the lobby of the Municipality at Palacio Municipal, H. Ayuntamiento Constitucional de Tlalnepantla de Baz, Estado de Mexico, México; and also at the municipal water utility, Servicios de Agua Potable Alcantarillado y Saneamiento Tlalnepantla de Bas De México (OPDM), Riva Palacio No. 8 3er. Piso, Tlalnepantla Centro, Tlalnepantla de Baz, Estado de México, Mexico.
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| To contact the project company, please write to: |
Mr. Juan Robles, Director de Administracion y Finanzas, OPDM, Riva Palacio No. 8 3er Piso, Tlalnepantla Centro, Tlalnepantla de Baz, State of Mexico, Mexico.
Telephone: 52-55-390 2718; Fax: 52-55-390-2707. |
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