Loan to fix Venezuelan power grid sparks outcry

CAF, based in Caracas but operated out of Bogota in neighboring Colombia, is the last multilateral agency to extend credit to the government of President Nicolas Maduro, whom the US and more than 50 other countries no longer recognize as Venezuela's legitimate head of state.

Maduro's opponents have long highlighted the country's dire power crisis, but question the motives and structure of the proposal.

The official application for the loan was made by the Maduro government's economy and finance ministry but the idea has been packaged as a humanitarian initiative involving elements of the opposition-controlled National Assembly and the UN Development Program (UNDP).

Opposition assembly deputy Jose Guerra and independent electricity experts Manuel Lara and Jose Aguilar maintain that the proposal is an attempt by the government to get around US sanctions and stay in power.

Lara and Aguilar say their review of the CAF loan report detailing equipment imports, including 30MW mobile generators, transmission cable and transformers, suggests that the proposed credit is overpriced by $146mn. They also challenge the assumption that the funds would be administrated by the UNDP and not fall into the hands of Venezuela's state-owned utility Corpoelec.

The UNDP has not yet commented on the proposal.

The proposal was submitted to the assembly in November by Pedro Diaz Blum, a self-described consultant who says he is channeling the idea through the Boston Group, a binational Venezuelan-US group of legislators created in 2002 with the aim of improving bilateral relations. No US congressman has commented publicly on the proposal.

The loan idea is endorsed by Francisco Rodriguez, a Venezuelan economist who recently left Wall Street to set up Oil for Venezuela, a non-profit dedicated to working toward the deployment of Venezuelan oil revenue to secure humanitarian aid. "We fully support the (bill) to attend the electrical emergency," Rodriguez told Argus, adding that the proposal aligns with his group's goals. He says the loan is equivalent to Venezuela's 2019 CAF debt maturities. "The procurement, administration and contracting of the loans is going to be carried out by UNDP. That is very clear in the (bill)," he said.

Former Zulia state governor Manuel Rosales, a founder of the Maracaibo-based opposition party Un Nuevo Tiempo (UNT), is promoting the CAF loan as a way to revive Zulia's oil-based economy.

The CAF loan would finance the installation or repair of 1.07GW of thermal generation capacity mainly in western Venezuela where Corpoelec has rationed electricity for up to 18 hours a day since 2016.

Up to 240MW of mobile generation units using diesel or natural gas would be installed at Corpoelec's 660MW Ramon Laguna and 1.4GW Rafael Urdaneta (Termozulia) power plants, which currently generate less than a combined 300MW.

The CAF loan also would fund a new 240kV transmission cable across the Lake Maracaibo bridge which has been down since a 2017 fire. Repairing the transmission system would allow Corpoelec to boost hydroelectric supplies to Zulia by over 300MW.

The project would replenish up to 600MW of supply to Venezuela's state-owned oil company PdV to recover its western division crude production, according to Rosales.

PdV and the oil ministry declined to comment, but acknowledged that unstable electricity supply in Zulia is a huge oil production bottleneck.

Additionally, the CAF loan would finance repair of up to 831MW of existing thermal capacity in Caracas and Merida, Tachira and Zulia states, according to the loan proposal seen by Argus.