honduras en el corazón de centroamérica

1
REPUBLIC OF HONDURAS
NATIONAL INVESTMENT PROMOTION PROGRAM
RENEWABLE ENERGY SECTOR INVESTMENT
OPPORTUNITIES
HONDURAS IS OPEN FOR BUSINESS
APRIL 2011
i
TABLE OF CONTENTS
I.
II.
Honduras in The Heart of America .........................................................................1
Relevant Topics ............................................................................................................3
A.
B.
C.
III.
IV.
V.
VI.
VII.
VIII.
IX.
Competitive Advantages ........................................................................................................................................... 3
Renewable Natural Resources Potential .............................................................................................................. 3
Energy Sector Opportunities ................................................................................................................................... 3
Electricity Subsector Evolution .................................................................................4
National Interconnected System (Sin) .....................................................................5
Energy Demand and Projections ..............................................................................6
Generation Expansion Plan (Peg) .............................................................................6
Installed Capacity Supply ............................................................................................7
Honduras: A Place to Invest ......................................................................................8
Renewable Energy Investment Opportunities .................................................... 10
A.
B.
C.
D.
E.
Hydroelectric Potential .......................................................................................................................................... 10
Wind Potential ......................................................................................................................................................... 12
Biomass Potential ..................................................................................................................................................... 12
Geothermal Potential ............................................................................................................................................. 14
Opportunities in the Central American Market .............................................................................................. 14
X. Transmission Project Opportunities..................................................................... 15
XI. Distribution Project Opportunities ...................................................................... 16
XII. Legal Framework for Foreign Investment............................................................ 17
A.
B.
C.
Law for the Promotion and Protection of Investments................................................................................. 17
Law for the Promotion of Public-Private Partnerships .................................................................................. 19
Framework law of the Electricity Subsector .................................................................................................... 21
XIII. Renewable Generation Incentives ......................................................................... 22
XIV. Related Entities.......................................................................................................... 23
1
I.
HONDURAS IN THE HEART OF AMERICA
2
Map of the National Interconnected System 2010 with bids for renewable energy projects
Source: Planning and Development Directorate
3
Source: AHPPER
II. RELEVANT TOPICS
A. COMPETITIVE ADVANTAGES
As indicated below:
a)
b)
c)
d)
e)
f)
g)
h)
Honduras has vast renewable resources to generate electricity.
A legal electricity subsector framework open to local and foreign investment.
Legal guarantees and competitive tax incentives.
Elimination of barriers to regional trade.
Institutional strengthening and regional regulations.
National and regional infrastructure.
Simplification of administrative procedures to set up businesses.
Establishment of minimum environmental protection and development standards.
B.
RENEWABLE NATURAL RESOURCES POTENTIAL
As indicated below:
a)
b)
c)
d)
e)
HYDROELECTRIC: Potential: 5,000 MW (only 10.5% has been used)
°
BIOMASS: Potential: ≥ 300 MW
WIND: Potential: ≥ 1,200 MW
GEOTHERMAL: Potential: ≥ 112.3 MW
2
PHOTOVOLTAIC SOLAR: 5.2 KWh/m day or 6 sun hours
C. ENERGY SECTOR OPPORTUNITIES
As indicated below:
4
a)
b)
c)
d)
Renewable natural resources not yet used.
Unfulfilled domestic demand.
Government openness to local and foreign private investment in generation, transmission and distribution.
The implementation of the SIEPAC project will increase the regional energy trade potential and the
development of regional mega power plants.
III. ELECTRICITY SUBSECTOR EVOLUTION
Since the Francisco Morazán Hydroelectric Power Plant (better known as El Cajón) with capacity of 300
MW started operations in 1985, Honduras stopped building major projects. Several consecutive draught
periods were reported in the 90’s that led the country to severe electric energy rationing. These events
encouraged the electricity subsector reform. As a result of the above, the Framework Law of the
Electricity Subsector was enacted in 1994. One of the objectives of this law was to open the market to
the private sector in the field of electricity production and distribution.
In fact, as of the coming into force of the law and with the participation of the private sector in electricity
generation projects, an increase in the installed capacity was reported and the electricity coverage was
substantially expanded. In 1995, the total coverage was 45% and as of now that coverage has increased
to 81.3%. The same as in other countries of the region, this increase in capacity was mainly through the
implementation of privately owned thermal power plants
Main indicators in the electricity market
Electricity coverage
Recent evolution, installed capacity (MV)
Hydro
Co-generation
Diesel
Gas
Coal
Biomass
Total
Renewable capacity percentage
Maximum demand
Recent evolution of the net generation (GWh)
Hydro
Co-generation
Diesel
Gas
Coal
Biomass
Total
Renewable generation percentage
Public net generation (GWn)
Private net generation (GWn)
Net generation (%)
System losses (%)
1990
1995
2000
2005
2007
2008
2009
2010
38.1%
45.3%
54.0%
63.9%
71.4%
76.4%
79.3%
81.3%
431
0
87
15
0
434
0
206
116
0
435
0
382
103
0
479
60
915
73
0
520
68
913
73
0
520
80
899
73
8
533
80.9%
351
756
57.4%
504
920
47.3%
702
1,527
31.4%
1,014
1,574
33.0%
1,126
1,580
32.9%
1,205
522
42
870
73
8
91
1,606
38.17%
1,203
526
20
892
73
8
91
1,610
38.32%
1,245
2,279
0
0
0
0
1,676
0
882
239
0
2,262
0
1,441
362
0
1,718
115
3,764
274
0
2,214
109
4,007
NA
0
2,305
243
4,210
57
0
2,279
100.0%
2,279
0
0.00%
23.2%
2,797
59.9%
1,915
883
31.56%
27.0%
4,065
55.6%
2,262
1,477
39.50%
18.1%
5,871
29.3%
1,653
3,972
70.61%
23.3%
6,330
35.0%
2,023
4,311
68.06%
21.2%
6,815
33.8%
2,010
4,805
70.51%
20.6%
2,797
34
3,409
56
45
156
6,497
45.4%
2,565
3,974
60.77%
22.5%
3,080
9
3,433
12
47
142
6,723
47.9%
2,731
3,991
59.37%
23.6%
5
The Electricity Subsector of Honduras led by the state-owned Empresa Nacional de Energía Eléctrica
(ENEE) is characterized by a vertical integration of the electric energy production, marketing,
transmission and distribution services. At present, ENEE keeps control of the last three activities;
however, as of December 2010 it only generated 36.6% of the total electric energy, purchasing 63.4% of
the generated energy from the private sector.
In fact, several Honduran private companies hired by ENEE are participating in the generation of electric
energy using thermal resources and more recently using renewable resources. The majority of the
generated power is sold to ENEE and ENEE distributes it to the various power consuming sectors of the
country.
In this sense, the single buyer model developed by ENEE was successful to attract private investment in
order to expand the generation capacity based on Power Purchase Agreements (PPAs). Private financing
became the standard for installed generation capacity expansion. In 2010, the participation of the
private sector in electric power generation represented 60% of the total power produced in Honduras.
The Government also granted concessions to private companies, most of them with Honduran capital,
for the construction and operation of power plants using renewable resources such as hydroelectric,
biomass and wind resources.
As of December 2010, 24 projects with an installed capacity of 148.9 MW were working, and it is
anticipated that 102 Megawatts of wind power will start operations by the end of 2012.
During 2009 and 2010, the government awarded several contracts approved by the National Congress of
the Republic. Additionally, a memorandum of understanding was signed with Sinohydro, a statedowned company of the People’s Republic of China, for the construction of the Patuca III Project (or
Piedras Amarillas) with a capacity of 104 Megawatts, and the construction of two additional projects on
the same river is anticipated in the short term: Patuca IIA (or La Terrosa) with 150 MW and Patuca II (or
Valencia) with 270 MW, making a total anticipated capacity of 524 MW. Los Llanitos (98 MW) and
Jicatuyo (173 MW) hydroelectric power plants are also top priority projects open to foreign investment.
As a result of the contract approval by the National Congress, the implementation of 50 private power
plants is expected in the next five years. Most of them will be hydroelectric power plants but some of
them will be wind, geothermal and biomass power plants. Approximately 250 MW of the total capacity
have been reserved for ENEE, and the remaining capacity, approximately 450 MW will be intended for
the Big Consumers.
IV. NATIONAL INTERCONNECTED SYSTEM (SIN)
Energy generation and supply is mainly carried out through the National Interconnected System (SIN).
However, the Department of Islas de la Bahia and the Department of Gracias a Dios have isolated
systems where private companies are in charge of energy generation and marketing.
The SIN power plants have a total installed capacity of 1,610.3 MW (December 2010) of which 36.6
percent (589 MW) correspond to state-owned hydroelectric power plants and 63.4 percent (1,021.3
MW) correspond to privately owned thermal, hydroelectric and biomass power plants.
Out of the 39 private generation companies operating in Honduras, thirteen (13) are hydro, eleven (11)
biomass and the rest are thermal generation plants driven by bunker or diesel fuel. Regarding to the
present installed capacity, as of December 2010 the thermal - renewable composition is 62 / 38%.
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The SIN operations are coordinated through the ENEE’s National Dispatch Center, an entity in charge of
managing the load economic dispatch. The Dispatch Center coordinates generation in Honduras and
energy exchanges with Nicaragua, Costa Rica, Panama and El Salvador.
V. ENERGY DEMAND AND PROJECTIONS
Energy demand in the country reported an average increase of 5.9% during the 2000-2010 period,
showing the highest growth in the 2001-2005 period, at a rate of 7.6%. A 4.2% growth was reported in
the 2006-2010 period. Such decrease was due to external factors such as the international financial crisis
and the recent political crisis.
According to the demand projection for the years 2011-2015, it is estimated that an average 5.2%
growth will be reported in those years. These projections allow the Empresa Nacional de Energía
Eléctrica to plan the balance between energy production and demand as well as the power.
VI. GENERATION EXPANSION PLAN (PEG)
In order to meet the future demand, ENEE has an Expansion Plan (PEG for its acronym in Spanish) which
contemplates the incorporation of several small- and medium-scale renewable projects. The plan
anticipates the withdrawal of some thermal power plants and the construction of big power plants using
wind and biomass resources as well as hydroelectric power plants with an aggregate capacity of 358
MW.
The development of the Expansion Plan will translate into the modification of the energy matrix with a
focus on the use of renewable energies which will have a positive impact, going from 38.0% in 2008 to
48.6% in 2015.
Energy and power projection
Base case
Low case
Year
Energy MWh
Power MW
2011
2012
2013
2014
2015
7,557,435
8,011,641
8,392,663
8,790,760
9,211,974
1,320.0
1,398.5
1,464.3
1,533.1
1,605.9
Source: ENEE
Energy
MWh
7,462,384
7,678,416
7,925,254
8,173,946
8,355,109
High case
Power MW
1,295.2
1,332.2
1,374.6
1,417.3
1,448.3
Energy
MWh
7,740,462
8,287,588
8,834,921
9,434,803
10,080,128
Power MW
1,352.9
1,448.8
1,545.0
1,650.3
1,763.6
7
Maximum demand
DEMANDA MÁXIMA (MWh): ESCENARIOS
3,500
3,000
2,500
2,000
MW
1,500
1,000
500
0
ALTO
AÑOS
BASE
BAJO
Source: ENEE
For administrative purposes, the country is divided into three areas: Central-South, North-West and the
Atlantic Coastline. The North-West area reports the highest energy consumption at 50.8%, followed by
the Central-South area at 39.5% and the Atlantic Coastline area at 9.7%, according to data as of
December 2010.
Regarding electric energy consumption as of December 2010, the household sector is in first place at
42.6%, followed by the commercial sector at 25.1%, and then, by the industrial sector (big and mediumsize industries) at 24.5%
In the case of the big cities, the Central District and San Pedro Sula consume 44% of the total energy of
the country, equivalent to 23% and 21%, respectively.
VII. INSTALLED CAPACITY SUPPLY
The electricity generation installed capacity as of December 2010 is 1,610.3 MW, which is deemed
favorable with regard to the projected demand, losses and system security.
The electric system of Honduras currently has seven hydroelectric power plants and three thermal
power plants owned by ENEE. The largest of them is the Francisco Morazán Hydroelectric Power Plant
with an installed capacity of 300 MW. Additionally, the private sector presently has a total of 39 power
plants distributed as follows: thirteen (13) small hydroelectric power plants, ten (10) power plants using
biomass and one (1) power plant using biodiesel, which contribute to renewable energy generation.
There are also 15 thermoelectric generation power plants.
Installed capacity as of December 2010
Power Plants
Hydroelectric power plants owned by ENEE
Thermal power plants owned by ENEE
Private thermal power plants
Private hydroelectric power plants
Private biomass power plants
Installed Capacity (MW)
464.4
124.6
867.9
62.0
91.4
8
Power Plants
Installed Capacity (MW)
1,610.3
Total
Source: Planning and Development Directorate
As we have been able to confirm, energy generation using the current thermoelectric sources requires
the development of renewable resources in the short term, particularly hydro resources, in order to
modify the electricity matrix and contribute at the same time to the economic development of the
country. This effort is included in the Electric Energy Generation Expansion Plan for the 2011-2016
period, a summary of which is presented below:
Expansion Plan 2011-2016
Year
2011
2012
2013
2014
2015
2016
Projects
West Solution
Coyoles Central
Renewable
Ceiba Repowering
Wind
Renewable Bid
Nacional de Ingenieros
Ceiba
Ceiba Solution
Small Hydro
Diesel Engines
West Solution
Coyoles Central
Ceiba Solution
CECHSA (Coal)
Small Hydro
Renewable Bid
Elcosa
Lufussa I
Lufussa I Expansion
Santa Fe
La Puerta Hitachi
La Puerta General
Small Hydro
Renewable Bid
Piedras Amarillas
Cajón Expansion
Renewable Bid
Coal power plant
Llanitos
Jicatuyo
Operation/Withdrawal
Operation
Operation
Operation
Operation
Operation
Operation
Withdrawal
Withdrawal
Operation
Operation
Operation
Withdrawal
Withdrawal
Operation
Operation
Operation
Operation
Withdrawal
Withdrawal
Withdrawal
Withdrawal
Withdrawal
Withdrawal
Operation
Operation
Operation
Operation
Operation
Operation
Operation
Operation
Power (MW)
30.0
20.0
20.8
30.0
102.0
0.7
20.0
26.6
60.0
4.6
15.0
30.0
20.0
60.0
150.0
6.2
113.0
80.0
40.0
30.5
5.0
18.0
15.0
8.3
137.0
104.0
75.0
149.2
150.0
98.0
173.0
VIII.HONDURAS: A PLACE TO INVEST
According to the fundamentals of the Country Vision, the State promotes comprehensive economic and
social development based on the following basic principles, among others: 1) Focus on the human being
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and his equitable and comprehensive development; 2) Economic growth as a means to generate
development; and 3) Development in harmony with nature.
In this sense, energy generation through the use of renewable resources with a special emphasis on
hydroelectric generation will be the permanent center of attention throughout the effectiveness of the
Nation Plan. It should be recognized that just like the geographic location and the road system represent
a regional leadership opportunity for Honduras, energy generation using renewable resources must
place the country in an advanced position with respect to the rest of Central American countries,
becoming a means to provide a competitive advantage to the companies that operate in the country.
Within this context, the Energy Policy of Honduras is focused on the following:
a) Reduce dependency on fossil fuels to generate electric energy through the promotion of renewable energy
generation;
b) Get deeper into and promote biofuel production taking advantage of the production potential of the African
palm tree, pine nut kernel, and agricultural and forestry waste;
c) Strengthen and modernize the Transmission and Control Infrastructure of the National Interconnected System
within the framework of better integration to the regional electricity market aimed to grid maintenance and
loss reduction based on an energy efficiency promotion policy in Honduras.
These policies are consistent with the guidelines established in the ENEE's Generation Expansion Plan
and with the Mesoamerican Energy Integration Program (PIEM) which, through the Electricity
Interconnection System for Central America (SIEPAC), will form the Central American Electricity Market
to supply the regional electricity demand.
It is anticipated that by the year 2022, the energy sector will have implemented public, private and
mixed investments for the development of renewable energy generation projects in a way that the
energy matrix will show a net share equivalent to 60% serving the total demand of the household,
commercial and industrial sectors through the use of renewable energy sources. Energy investments will
transform the generation matrix and renewable energy will have a majority 80% share and fossil fuels
will have a 20% share.
The private sector will take ownership of the energy efficiency issue and public-private partnerships will
be established for the joint development of research processes to take advantage of natural energy
sources for energy production.
Honduras will become the highest contributor of Emission Reduction Certificates - CERTS- in Central
America and the use of financial instruments derived from the agreements of the UN Convention on
Climate Change will be a source of income and employment for thousands of Hondurans.
With regard to the 2010-2014 Plan, ENEE has started the implementation of the Project: “Energy Sector
Efficiency Improvement” with the World Bank funding. It has the purpose of improving ENEE’s efficiency
in all its areas, such as: i) Commercial and corporate management improvement; ii) implementation of
distribution grid investment; and iii) strengthening ENEE’s institutional capacity and corporate
governance.
The main outcomes of commercial and corporate management improvement are:
a) Implementation of a corporate resources, commercial and incidence management system, improving ENEE’s
management and customer-oriented commercial practices;
b) Remodeling work design in 34 ENEE offices + call center + COD;
c) Design of technical assistance implementation strategy and survey campaign (approximately 1,400,000 users);
and
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d) Remote measuring equipment, modems, remote disconnection and reconnection devices and monitoring and
control system.
The implementation of distribution grid investments will have the following outcomes:
a) Procurement of voltage transformers, restorers, section breakers and regulators; and
b) Elimination of transformers containing PCB contaminants.
Finally, the expected outcomes of ENEE’s institutional capacity and corporate governance strengthening
project are the following:
a) Energy sector governance strengthening;
b) ENEE’s financial sustainability analysis including rate and subsidy structure and development of a commercial
operation strategy.
c) Communication, social outreach and participation program.
d) Project management, monitoring, assessment and auditing.
The above provides a strategic framework for the various actors of the electricity subsector, particularly
the Government of the Republic and the Empresa Nacional de Energía Eléctrica, to carry out the
necessary actions to change the energy matrix of the country and undertake the programs and projects
to reach the goal set out in the Country Vision.
IX. RENEWABLE ENERGY INVESTMENT OPPORTUNITIES
As mentioned before, Honduras has implemented an energy matrix diversification policy in order to
reduce energy price volatility, decrease generation costs and improve energy security in the country.
In this regard, the country’s natural resources have enormous potential and can be developed at
competitive prices considering that the oil price will keep moving in an upward trend for a long time.
Additionally, the implementation of the regional SIEPAC project will expand the regional energy market
potential and will promote the development of big generation projects.
A. HYDROELECTRIC POTENTIAL
The hydroelectric potential of Honduras is approximately 5,000 MW, of which only approximately 10.5%
is used.
Honduras has implemented a generation diversification policy through the execution of generation
projects using renewable sources, especially hydroelectric sources, by the private sector (recent bid for
250 MW) and the public sector with the signing of the memorandum of understanding with Sinohydro, a
state-owned enterprise of the People’s Republic of China, for the construction of the 104 MW Patuca III
or Piedras Amarillas Project.
There are plans in the short term to execute two more projects on the same river with the same
company: Patuca IIA or La Terrosa (150 MW) and Valencia or Patuca II (270 MW), for a total estimated
capacity of 524 MW. It is worth mentioning that Los Llanitos (98 MW) and Jicatuyo (173 MW)
hydroelectric power plants are also top priority projects open to foreign investment.
As shown in the following table, the hydro potential of the country is an investment opportunity. Below
is a comparative table of the hydroelectric potential of the Central American region.
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Hydroelectric potential of the Central American region
7000
POTENCIAL HIDROELECTRICIDAD EN CENTROAMERICA (MW)
6000
COSTA RICA
POTENCIAL HIDRO
GUATEMALA
HONDURAS
5000
POR DESARROLLAR
DESARROLLADO
4000
3000
EL SALVADOR
PANAMA
NICARAGUA
2000
1000
0
Source: DGE/SERNA. Rural energization diagnosis
The state-owned hydroelectric power plants are the following
Power Plant
MW
300.0
80.0
Francisco Morazán
Río Lindo
Cañaveral
29.0
El Níspero
22.5
Santa María del Real
1.3
El Coyolar
1.6
30.0
Nacaome
464.4
Total
The privately owned hydroelectric power plants are the following
Power Plant
Zacapa ( Cenit)
La Nieve
La Esperanza
MW
0.5
0.5
12.8
Babilonia
4.0
Yojoa
0.6
Río Blanco
5.0
Cececapa
2.9
Cuyamel
7.8
Cortecito
3.2
San Carlos
2.3
Las Glorias
5.8
Coronado
4.5
12
Power Plant
MW
Cuyamapa
12.2
Total
62.0
It is pertinent to say that ENEE is currently implementing a Technical Cooperation program with Taiwan
through the company Taiwan Power Company (TPC) to plan the water resources in the country.
B.
WIND POTENTIAL
The wind energy potential in the country is estimated at approximately 1,200 MW.
The company Energía Eólica de Honduras (EEH in Spanish), a subsidiary of Meso-América Energy, started
the construction of the Wind Electric Honduras 2000 Project (also known as Cerro de Hula Wind Project)
located 24 kilometers south of the capital city, Tegucigalpa, in the municipalities of Santa Ana and San
Buenaventura in the Department of Francisco Morazán.
The power plant rated capacity will be 102 MW and the estimated annual production of energy will be
360 GWh. The construction of the Cerro de Hula Wind Project will prevent the emission into the
atmosphere of approximately 270 tons of greenhouse gases (TCO2e).
Wind potential in Central America
Source: DGE/SERNA. Rural energization diagnosis
C. BIOMASS POTENTIAL
At present, there is immediate availability of wood waste from the forestry industry and bagasse from
the sugar mills. There are some examples of autogeneration of electricity from wood waste in the
country, such as Aserradero Yodeco, Aserradero Lumberton, the National School of Forestry Sciences
and the agroforestry community of Chagüite Grande.
13
Likewise, during the sugar production process sugar mills take advantage of the bagasse that they
produce for autogeneration of electricity. The ten (10) sugar mills installed in the country have an
installed capacity of 91.4 MW. It is important to mention that there are two companies in the country
that produce energy from African palm trees (Ecopalsa). In the Valley of Sula there are experimental
crops of e-grass to produce electric energy with capacity of up to 20.0 MW.
Also, the private sector promotes the generation of biofuels through the development of agro-energy
districts with a generation capacity of up to 40 MW located in various regions of the country. There are
plans to implement 8 agro-energy districts to produce a total of 320 MW in the next 3 years.
The biomass energy potential is 361.1 MW and the following chart shows the various sources:
300
POTENCIAL BIOMASICO HONDURAS (MW)
250
200
150
100
50
0
DSU
Palma
Caña
Café
Ban/Pla
Cítricos
Bovino
Porcino
Avícola Residuos Aserrín
en
Bosque
Potencia
Zona
(Mw )
Source: DGE/SERNA. Rural energization diagnosis
With regards to the energy potential from this source, the installed capacity in the National
Interconnected System as of December 2010 is 91.4 MW (25%), distributed as follows:
Power Plant
La Grecia
Eda
MW
12.0
1.2
Aysa
8.0
Lean
0.5
Aguán
0.5
Cahsa
25.8
Azunosa
4.0
Tres Valles
7.8
Chumbagua
14.0
Celsur
16.7
Total
90.4
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D. GEOTHERMAL POTENTIAL
Several studies have been carried out in different regions of the country. As a result of these studies, the
process started with the Platanares project, which was identified as the site with the highest potential
for geothermal resource development. According to estimates based on the sites identified, the
geothermal potential of the country is 112.3 MW, which can be exploited to generate electricity.
Power Plant
MW
Location
Platanares
San Ignacio
35.0
14.0
Copán
Francisco Morazán
Azacualpa
36.0
Santa Bárbara
Pavana
11.0
Choluteca
Sambo Creek
15.0
Atlántida
El Olivar
1.3
Cortés
Total
112.3
In Central America, Honduras, along with Panama, is the country with the lowest energy potential from
geothermal resources and 100% to be developed, as shown in the following chart:
1400
POTENCIAL GEOTERMICO EN CENTROAMERICA (MW)
NICARAGUA
1200
POTENCIAL GEOTERMICO
POR DESARROLLAR
INSTALADO
1000
GUATEMALA
800
600
400
EL SALVADOR
COSTA RICA
200
HONDURAS
PANAMA
0
Source: DGE/SERNA. Rural energy process diagnosis
E.
OPPORTUNITIES IN THE CENTRAL AMERICAN MARKET
The implementation of the SIEPAC project will increase the regional energy trade potential and the
development of big regional generation projects. The project consists of the execution of a Regional
Electricity Transmission System that will strengthen the Central American electric grid (Guatemala, El
Salvador, Honduras, Nicaragua, Costa Rica y Panamá), as described below:
230 kV single-circuit transmission lines with towers prepared for a future second circuit with the
following estimated lengths: Guatemala: 281 km; El Salvador: 286 km; Honduras: 270 km; Nicaragua: 310
km; Costa Rica: 493 km; and Panama: 150 km. One of the guard cables of the line will be of the OPGW
type with 12 mono mode fibers and 24 shifted dispersion fibers plus the addition of a T tower OPGW
cable to the Cajón Power Plant in Honduras.
The SIEPAC line will connect to the national grids of each country through a total of 28 bays in the
following substations: Guatemala - Norte, Panaluya and Guatemala - Este in Guatemala; Ahuachapán,
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Nejapa and 15 de Septiembre in El Salvador; San Buenaventura (including the additional works in this
substation) and Agua Caliente in Honduras; Planta Nicaragua and Ticuantepe in Nicaragua; Cañas,
Parrita, Río Claro and Palmar Norte in Costa Rica; and Veladero in Panama. In the Ahuachapán - Nejapa 15 de Septiembre section in El Salvador, the second circuit will be enabled at the same time.
SIEPAC Line: First regional transmission system
Source: SIEPAC
X. TRANSMISSION PROJECT OPPORTUNITIES
With regard to transmission activities, the framework law reserves these activities to the State through
ENEE, who manages the operation of the Transmission System and Dispatch Center. On the other hand,
ENEE needs to execute transmission, substation and transmission line construction projects throughout
the national territory. These projects may be executed under a Public-Private Partnership modality
(APPs, for its acronym in Spanish).
The following are among the main projects which are under execution with Inter-American Development
Bank (IADB) funding:
Description
Construction of the Amarateca Substation, 230/128 KV. 150 MV; 230/ 34.5 KV, 50 MVA
Expansion of the Naco Substation and construction of the Erandique and Chichicaste
Investment (Thousands of US$)
26,880
2,800
16
Description
Investment (Thousands of US$)
substations
Construction of the138 kV SPSS-Naco, 69 kV Las Flores-Erandique, and 69 kV DanlíChichicaste lines.
Construction of the 34.5 kV sub-transmission line from the Erandique Substation to the
municipality of La Virtud.
9,000
732
The following projects will be funded by private renewable generation companies:
Description
Investment (Thousands of US$)
11,406
Construction of the Cuyamel Substation and the 138 kV Masca-Cuyamel line, 40 km.
Construction of the Leán Substation, installation of a 138/69/34.5 kV 50 MVA
transformer, opening of L.516 Line and construction of two (2) 477 MCM Flicker
conductor lines of 13.66 km each
7,429
The Empresa Nacional de Energía Eléctrica has programmed the execution of the following projects with
national funds:
Description
Investment(Thousands of US$)
Construction of the Catacamas Substation and the 69 kV Juticalpa-Catacamas Line, 40
km, single circuit, 477 MCM; expansion of the Juticalpa Substation.
Expansion of the Zamorano Substation.
Expansion of the Cañaveral Substation.
Expansion of the Siguatepeque Substation on the high voltage side (138 KV) and on the
medium voltage side (34.5 KV), opening L550 line and new 34.5 KV distribution circuits.
Construction of the La Victoria Substation,138/13.8 KV, 50 MVA.
Construction of the Cerro Grande Substation.
7,779
1,258
1,913
1,305
5,548
3,175
On the other hand, the following transmission projects can be funded using a Public-Private Partnership
(APP) modality:
Description
Investment (Thousands of US$)
Construction of the Centro Substation, the Bellavista-Centro line, 2.5 km, single circuit,
477 MCM conductor 138 kV, and expansion of the Bellavista Substation.
Construction of the Cerro Hula-Danli Line, 80 km; and a 50 MVA_230/34.5 kV
Transformer.
Construction of the Tocoa Substation.
Expansion of the Masca Substation on the high voltage side (138 kV) arranged in a loop,
expansion on the medium voltage side
(34.5 kV) and a 50 MVA/138/34.5 kV) transformer.
Expansion of the Isletas Substation.
Expansion of Toncontín Stage II
Construction of the San Pedro Sur - Ciudad El Progreso Line, 45 km; expansion of the
Progreso Substation and SPS
Construction of the Ocotillo Substation.
Construction of the Buenos Aires Substation
7,146
11,700
4,225
2,407
1,541
7,700
7,603
5,507
5,548
XI. DISTRIBUTION PROJECT OPPORTUNITIES
The distribution activity is open to the private sector and the Framework Law even provides that priority
will be given to this activity through concession. At present, aside from ENEE only the company ELCOSA
supplies electricity to some private companies.
17
The Law provides that in order to operate, distribution companies should enter into energy supply
contracts with generation companies, such contracts should be for a term of not less than five years, and
distribution companies will have generation facilities only when this is the only way to provide the
service or is the most economic way to do so in the opinion of the National Energy Commission.
For some time now, electrification projects have been executed with Inter-American Development Bank
and Central American Bank for Economic Integration funding and with the cooperation of countries such
as Finland, Japan, Korea and Norway. Additionally, electricity has been brought to several communities
with ENEE and Central Government funding.
Finally, we have identified the following projects that can be executed under the Public-Private
Partnership modality:
Description
Investment (Thousands of US$)
Normal expansion of the 34.5/13.8 kV distribution grid.
Normal expansion of the 34.5/13.8 kV distribution grid.
Normal expansion of the 13.8/34.5 kV distribution grid.
24,841
32,947
25,809
XII. LEGAL FRAMEWORK FOR FOREIGN INVESTMENT
The regulatory provisions that govern foreign investment in Honduras establish, in a harmonious and
systematic way, the commitments and provisions that should be observed by foreign capital. The
internal regulations are constituted by constitutional and legal provisions.
Investment attraction is a State’s priority.
A. LAW FOR THE PROMOTION AND PROTECTION OF
INVESTMENTS
The primary interest of the State is to attract, promote and protect national and foreign investments,
which will be given facilities and guarantees for their development.
Guarantees:
For Domestic and Foreign Investment
a)
b)
c)
d)
e)
f)
Unlimited access to foreign exchange.
Right to open bank accounts and withdraw deposits, in full or in part, in freely usable currency.
Protection of intellectual property rights.
Right to property.
Right to repatriate 100% of compensation received for expropriation.
Freedom to produce and market goods and services.
For Foreign Investment
a)
b)
c)
d)
e)
f)
Equal treatment to domestic investment.
Unrestricted market access.
Transfer of utilities, profits, royalties and compensations, or of all investment, in money or securities.
Access to credits in the financial system.
Free shareholding in a company.
Unrestricted right to establish branches, subsidiaries, representatives or joint ventures.
18
Sectors Excluded by Law
o
o
Activities for the treatment of toxic pollutants or radioactive waste.
The manufacture, import, distribution and sale of weapons, ammunition and the like.
Preventive Conflict Regime
Those interested in developing real estate investment projects may qualify under this regime to prevent
future conflicts, and have 2 years to start investing; after this period, its benefit is terminated. To apply
this regime, a request must be submitted to the Technical Secretariat of the National Investment
Council.
If a dispute is submitted over the property object to investment and if its value exceeds US$500,000, it
must be submitted in the following order: direct settlement, conciliation and arbitration under the
Arbitration and Conciliation Law.
Guarantee Regime for the Completion of Projects
When a property object to an investment project is being disputed, the applicant is eligible for this
regime provided they have permits and licenses for its development, has available financing, has started
construction, and if a third who is not in possession of the property claims ownership.
To attend the above, the applicant may request to the Technical Secretariat of the National Investment
Council, the constitution of a trust or that the legal action is resolved by arbitration.
Legal Stability Contracts
Investors who commit US$2 million in the form of: Capital injections, Acquisition of more than 50% of
shares owned directly or indirectly by the State, or Public-Private Partnerships; will be insured for 15
years, maintaining the same tax conditions when developing the project. If it is a forestry project, these
contracts may be extended to 25 years.
Dispute Settlement
The Law for the Promotion and Protection of Investments guarantees the legal subjection to foreign
jurisdiction between foreign and domestic investors, or between foreigners and the State; as well as full
recognition of international arbitral awards in accordance with the provisions of the following
instruments:
o
o
o
o
Convention on the Recognition and Enforcement of Foreign Arbitral Awards.
Inter-American Convention on International Commercial Arbitration.
Convention on the Settlement of Investment Disputes between States and Nationals of Other States.
Treaty of Reciprocal Protection of Investments ratified by Honduras.
The Law also provides for possible variables and leading arbitration mechanisms.
Tax Benefits
If the Executive Branch, through SEPLAN, declares the investment project of priority interest:
o
o
Amortization of pre-operating expenses incurred within 5 years.
Normal and accelerated depreciation.
Investment by region: those investments over US$2 million will enjoy the benefits:
o
Partial Exemption of Income Tax, which shall not exceed:
 50% of the investment in priority projects without considering activities or regions as restriction, only
increased investment shall apply.
 60% on projects of priority activities or regions.
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
70% in projects that: are of major interest to develop priority activities and to develop regions of priority
interest.
The criteria for the benefit timeframe shall be drafted by SEPLAN and adopted at the Ministers’ Council.
The benefits will be granted provided that the investor does not have to pay taxes in other countries on
income earned in Honduras.
Megaprojects
Megaprojects are those that SEPLAN qualifies as national interest, and require an investment of no less
than US$50 million. The National Investment Council will implement an accelerated investment
procedure, with prior request, which will be approved by the Executive Power during the Ministers’
Council.
Competent Entity
The Law for the Promotion and Protection of Investments establishes the National Investment Council
as the responsible entity for the promotion and development of private investments, the establishment
of offices for facilitation and assistance to investors, and public policies to foster a favorable investment
climate.
Other Provisions
o
o
o
Creation of Agro-industrial Export Parks, which promote SMMEs and enjoy the benefits provided by it.
Linking with PPPs and CoALIANZA.
Reforms the following laws:
 Article 310 of the Code of Commerce.
 Articles 55, 60 and 61 of the Industrial Property Law.
 Article 21 of the Law of Representatives, Distributors and Agents of National and Foreign Companies.
o
Repeals the following laws:
 Articles 308 and 309 of the Code of Commerce.
 Section 1565 of the Civil Code.
 Articles 32, 33 and 34 of the Immigration and Nationality Law.
 Investment Law (Decree 80-92).
B.
LAW FOR THE PROMOTION OF PUBLIC-PRIVATE PARTNERSHIPS
This law governs and regulates the public-private participation contracting processes for the execution,
development and management of public works and services.
What is Public-Private Participation?
It is a strategic alliance -formalized in a contract- by which the State agrees to firm or contingent
commitments, and its contributions may be:
a)
b)
c)
d)
e)
f)
Contributions in cash
Technical studies
Subscription of shares or purchase of other securities that can be negotiated in the financial market
Assignment of goods of public domain (concessions without assignment of title)
Granting permits and licenses to conduct the authorized activity
Assignment of rights over State or Municipal property
Public-Private Partnerships
The Law for the Promotion of Public-Private Partnerships establishes that the partnership will adopt the
modality agreed by the Parties, such as:
20
a)
b)
c)
d)
e)
f)
Co-investment (joint venture)
For profit or non-profit juridical persons
Participation contracts
Management contracts
Trust funds
Any other modality that may be suitable for the execution of the works and/or supply of services.
Risks
The risk and cost distribution that the Public-Private Partnership implies should be agreed based on the
specific needs of the alliance, and they maybe:
a)
b)
c)
d)
Financial
Commercial
Operating
Risk imputable to unforeseen causes
Awarding Process
The Public-Private Partnership is awarded after a simple process that considers the following two
criteria: economic and technical. The economic criterion evaluates who renders the service with the
lowest cost, who offers more benefits to the State, and who requires low co-financing or small
contribution from the State. The technical criterion only determines who meets the technical
requirements.
Co-partnership
The Law for the Promotion of Public-Private Partnerships creates a facilitating institution: The
Commission for the Promotion of Public-Private Partnerships (COALIANZA). COALIANZA directly reports
to the Presidency of the Republic and is responsible for the management and promotion of PublicPrivate Partnership projects and processes.
In principle, projects to be executed under the Public-Private Partnership modality should be part of the
National Public Investment System, and have a feasibility study with cost-benefit analysis and feasible
funding methods that ensure their execution. The evaluation is conducted by COALIANZA. Prior to this
evaluation, other public entities acting as initiators should request COALIANZA’s support for the
formulation of projects in order to join the System.
Regulation, Control and Follow-Up
Sectoral regulatory entities created by special laws will be responsible for the execution of works and
supply of services through the Public-Private Alliance modality. In the absence of a regulatory entity, the
Superintendence of Public-Private Partnerships created by the Law for the Promotion of Public-Private
Partnerships will be in charge.
Transparency
Public-Private Partnerships are subject to a stringent transparency regime. The Law for the Promotion of
Public-Private Partnerships establishes that the financial and non-financial risks, guarantees, future
commitments and fiscal contingencies are determined by the Finances Secretariat (SEFIN) based on a
fiscal risk analysis conducted by the National Commission for Public Credit. SEFIN also has authority to
issue provisions to register the firm and contingent quantifiable commitments as well as the enforced
guarantees.
Below is a list of the main laws and regulations applicable to the Honduran electricity subsector:
21
Constitution of the Republic
Pursuant to Article 340 of the Constitution of the Republic the State has the obligation to regulate the
use of the resources based on the social interest.
Main Laws and Regulations applicable to the Electricity Subsector
a)
b)
c)
d)
e)
f)
g)
Decree No. 158-94 of November 1994. Framework Law of the Electricity Subsector.
Decree No. 131-98, published in May 1998. It creates the National Energy Commission.
Agreement No. 934-97 of September 1997. Regulations for the Framework Law of the Electricity Subsector.
Decree No. 85-98 of April 1998. Law of Incentives for Renewable Resources.
Decree No. 267-98 of December 1998. Incentive Law Reform.
Decree No. 45-2000 of May 2000. Reform of Article 12 of Decree No. 267-98.
Decree No. 70-2007. Law for Promotion of Electric Energy Generation using Natural Resources of October
2007.
C. FRAMEWORK LAW OF THE ELECTRICITY SUBSECTOR
The Framework Law of the Electricity Subsector in force governs the electricity sector. Below is a
summary of the main aspects:
The main purpose of this Law is to regulate the electric energy generation, transmission, distribution and
marketing activities and applies to all natural and juridical persons and public, private and mixed entities
engaged in these activities.
It also facilitates the participation of a company in the generation activities and promotes distribution.
Furthermore, it encourages private investment in production and distribution thus ensuring market
competitiveness wherever applicable. It specifically intends to promote competitiveness among the
electricity production and demand markets to ensure long term supply.
The Energy Cabinet and the National Electric Energy Commission
Within the framework of this law, the Energy Cabinet was created as the senior management
organization in charge of defining and formulating policies applicable to the subsector; on the other
hand, the National Electric Energy Commission (CNEE, for its acronym in Spanish) was created as well as
an independent entity responsible for regulatory tasks such as the establishment of an update rate to
calculate tariffs, approval and implementation of bar prices, and proposals for final consumer rates.
The Energy Cabinet is in charge of the formulation and coordination of policies, plans and programs
relative to the sector. It is chaired by the President of the Republic and the Secretariat for Natural
Resources and Environment (SERNA, for its acronym in Spanish) coordinates the entity and acts as the
secretariat for the institution.
SERNA performs the following functions, among others:
a)
b)
c)
d)
e)
f)
Coordinate the Energy Cabinet.
Chair the ENEE Board of Directors.
Grant operation licenses to the companies of the sector.
Issue technical regulations.
Approve electricity purchase and sale contracts proposed by ENEE and submit them
Congress of the Republic; and
Grant environmental licenses for electricity projects.
The National Energy Commission (CNE) has authority for the following, among others:
a) Approve the classification as big consumer in the national territory;
to the National
22
b) Determine energy sale contracts with distribution companies;
c) Approve the quality, reliability and safety standards to be included in the implementation of the expansion
plans of the system.
d) Apply and supervise compliance with the legal and regulatory standards.
e) Approve and make effective the bar and final consumer prices; propose the Short-Term Average Marginal Cost
as well as the corresponding Adjustment Formulas.
f) Approve expansion programs.
g) Submit the energy purchase and sale contracts to be signed by ENEE to the approval of the Secretariat for
Natural Resources and Environment (SERNA).
The Law assigns ENEE the responsibility for implementing the energy economic operation and dispatch,
entering into import and export contracts, and preparing SIN expansion programs.
Likewise, the law authorizes public, private and mixed companies to sell their energy directly to a big
consumer or a distribution company. Generators are also allowed to take the initiative to sell their
product to ENEE, in which case ENEE guarantees the purchase if the price is equal to or lower than the
short term marginal cost. ENEE may promote purchases and the rate to be applied will be that resulting
from the bidding process.
In case of any surplus, it can be exported after making sure that the domestic demand has been fulfilled.
In such case, only ENEE will charge toll fees for the use of its facilities as well as administrative expenses.
The State reserves the right to operate the Transmission System and the Dispatch Center. However,
public, private or mixed companies may participate in transmission and distribution activities and any
electricity company or big consumer will be allowed to connect to their facilities if they request to do so.
The law establishes a rate system under the following criteria: All customers, with the exception of
household customers, will be charged between 100% and 120% of the total cost of the supply; b) For the
household sector, if the consumption exceeds 500 kWh, it will be charged at 110% of the cost; if the
consumption ranges between 301 and 500 kWh, the charge will be at least 100% of the cost; if the
consumption ranges between 101 and 300 kWh, the charge will be at least 80% of the cost; and if the
consumption ranges between 0 and 100 kWh, the charge will be at least 45%.
Rates applicable to distributor sales will be based on the concept of Bar Price. The average marginal cost
over a period of 5 years will be used to calculate it. Energy and power sales will be exempted from sales
tax.
As a condition for generation or distribution companies to participate in the sector, they must enter into
a contract with the Secretariat for Public Works, Transportation and Housing, for a term between 10 and
50 years, and such contract may be renewable.
XIII.
RENEWABLE GENERATION INCENTIVES
The Law of Incentives for Renewable Sources, Decree 85-98 and Decree 70-2007, establishes a series of
incentives for the promotion of electricity projects based on renewable energy sources. The incentives
specified by the law are for those using hydraulic, geothermal, solar, biomass, wind, alcohol, urban solid
waste, and vegetal sources.
In order to guarantee the promotion of projects based on renewable resources, contracts for electricity
from renewable resources will have dispatch priority over others using non-renewable resources.
Renewable power plants will enjoy the following benefits:
a) Import tax and duties exemption during the study and construction period.
23
b) Sales tax exemption for equipment, accessories and parts during the study and construction period;
c) Exemption from income tax, temporary solidarity contribution, net assets tax and any other income taxassociated taxes for a term of 10 years starting from the commercial operation start date for projects with an
installed capacity of up to 50 MW;
d) Temporary import tax exemption. Renewable energy plants will receive from ENEE a 10-year contract and a
rate 10% higher than the short-term marginal cost. For power plants of up to 50 MW, the 10% rate incentive
will be extended for 15 years.
Renewable energy supply contracts subscribed by ENEE will have a maximum duration of 20 years. With
regard to dispatch, it is clearly established that all power plants using renewable sources will have
priority. Projects of less than 3 MW are not required to sign an operation contract and will follow a
simplified procedure to obtain their operation license.
In conclusion, the price for renewable projects is based on the short-term marginal cost. The energy base
price is the short-term marginal cost published in the Official Gazette La Gaceta. The incentive which is
part of the Total Price will be the value equivalent to 10% of the Base Price in effect as of the contract
signing date and such incentive will be applied only during the first 10 years starting from the operation
start date.
For projects of less than 50 MW, the term will be 15 years. The base price will be annually indexed based
on the U.S. inflation index. Adjustments will be applied at the end of each year after the commercial
operation date of the power plant. In any case, the maximum adjustment value due to inflation will be
1.5% per year. Supply contracts signed by ENEE will be for a maximum term of 20 years.
XIV.
RELATED ENTITIES
Entity
Web page
Empresa Nacional de Energía Eléctrica
www.enee.hn
Other state entities:
National Energy Commission
Secretariat for Natural Resources and Environment (SERNA)
www.cne.gob.hn
www.serna.gob.hn
Private Sector:
Honduran Council of Private Enterprise (COHEP)
Honduran Association of Small Renewable Energy Producers (AHPPER)
www.cohep.com
www.ahpper.org