The European Investment Bank is providing a USD 40 million loan (some EUR 47 million) (1) to Companhia de Gás de São Paulo (Comgás), owned by BG Group Plc and Shell, to expand and modernise a natural gas distribution network in the State of São Paulo Brazil.

Comgás is a gas distribution company, privatised in 1999, selling gas for the industrial sector, commerce, household consumption and for vehicles. It has a 30-year concession for the distribution of gas and is Brazil's largest gas distribution company serving 26 million people living in 177 municipalities within some 54,000 km². The concession area is the industrial heartland of Brazil that accounts for 95% of the industrial base in the State of São Paulo.

Comgás' investment will further the development of the market for natural gas in Brazil, a strategic objective for the Brazilian Government. It complements the investment in the Bolivia-Brazil gas pipeline, which benefited from a USD 60 million loan from the EIB in 1998.

The project will have a positive impact on the environment since it will enable Comgás' industrial and commercial customers to replace oil products by natural gas, which will result in lower specific emissions and will reduce pollution. The project will also contribute to reduced gas losses and increased safety in gas distribution.

The 8-year bullet loan can be disbursed either at fixed rates or at floating rates, the latter being capped at LIBOR + 15 basis points. It is guaranteed by BBVA and Banque Sudameris (IntesaBCI Group). Risks of currency non-transfer, expropriation, war and civil disturbance are covered by the European Union (EU) budget guarantee.

The loan is provided in the context of the EU co-operation policy with third countries. In Asia and Latin America (ALA), the EIB may lend up to EUR 2.48 billion during 2000-2006 to support capital investment projects implemented by subsidiaries of EU companies or joint-ventures between EU and ALA firms, or investment that results in environmental improvements or fosters regional integration. The EIB was set up in 1958 to finance investment furthering EU integration. It lends for regional development, infrastructure, energy, industry and environment. Outside the EU, the Bank contributes to the European development co-operation policy in some 150 countries in Central and Eastern Europe, the Mediterranean region, Africa, the Caribbean and the Pacific, Asia and Latin America.

In 2000, the EIB provided loans totalling some EUR 36 billion. The Bank borrows on the capital markets the funds for its lending. Its bonds have regularly been rated "AAA" by the leading rating agencies. The EIB works on a non-profit basis and can pass on to project promoters the excellent conditions it obtains on the markets. The EIB may finance up to 50 percent of project cost. On average it provides one third of the funding and co-finances investments with other institutions. 

(1) 1 EUR = 0.8676 USD