The European Investment Bank (EIB), the European Union's long-term financing institution, is lending ECU 72 million (1) for the construction of a combined-cycle power plant in the Philippines. The EIB loan will go to the First Philippine Gas Power Corporation owned by the joint-venture of British Gas and two Philippines entities, the First Philippine Holdings Corporation and the Meralco Pension Fund, for their plant located near Batangas, some 100 km south of the capital Manila.

The new power station, to be developed on a build, own, operate basis, will bring environmental benefits and contribute to diversify the national energy supply by promoting a downstream market for indigenous natural gas; the gas will be supplied from an indigenous gas field near the island of Palawan, being developed by Shell Philippines. Among others, the project is co-financed with the Hermes Kreditversicherung A.G., the EXIM Bank of Malaysia, the Malaysia Export Credit Insurance, the Kreditanstalt für Wiederaufbau, as well as a private placement. The commercial risk of EIB's loan is guaranteed by a syndicate of banks led by ABN AMRO Bank N.V., Westdeustsche Landesbank Girozentrale and Bank of Tokyo-Mitsubishi, Ltd., which also co-finance part of the project.

In 1993 the EIB started lending for investment in some thirty countries of Asia and Latin America as part of the European Union's co-operation policy. Energy and development and improvement of the environment are among the aims of the EU-ASEAN Co-operation Agreement. The Bank's commitment in the Philippines totals ECU 145 million. Other EIB loans went to air transportation (ECU 50 million) and industry (ECU 23 million).

The EIB was set up in 1958 under the Treaty of Rome to provide loan finance for capital investment furthering European Union policy objectives, in particular, regional development, European infrastructure, energy, industry and environment. Outside the Union, the EIB contributes to European development co-operation policy in accordance with the terms and conditions laid down in the various agreements linking the Union to some 130 countries in Central and Eastern Europe, the Mediterranean region, Africa, the Caribbean and the Pacific, Asia and Latin America.Following an invitation from the European Council of Ministers, the EIB's Board of Governors authorised lending up to ECU 750 million, over a period of three years (1993-1996), for projects of mutual interest located in Asian and Latin American countries (ALA). On February 1997 EIB's Board of Governors approved a new lending facility for projects in ALA countries of ECU 275 million to be used by the end of June 1997. Additionally, a new lending facility of ECU 900 million for projects in ALA countries to be financed during 1997-1999 was approved by the Board of Governors on June 1997.Under these authorisations the EIB has already provided ECU 440 million for projects in Asia: for electricity development in India (ECU 55 million), Pakistan (ECU 81 million) and the Philippines (ECU 72 million), for natural gas transport in Indonesia (ECU 46 million) and Thailand (ECU 58 million), for the development of an offshore oil and natural gas field in China (ECU 55 million), and for airport infrastructure (ECU 50 million) and a cement factory (ECU 23 million) in the Philippines.

(1) The conversion rates used by the EIB for statistical purposes during the current quarter are those obtaining on 30 September 1997, when ECU 1 = GBP 0.69, USD 1.113, PHP 37.1214.