TEGUCIGALPA, Honduras – Top officials from El Salvador and the Inter-American Development Bank signed the documents of two loans totaling $40 million for a Central American electricity interconnection system, a key step towards regional integration under Plan Puebla Panama.
The loans were signed in Tegucigalpa during a meeting of the IDB governors for the countries of the Central American Isthmus and the Dominican Republic.
El Salvador Finance Minister Juan José Daboub and IDB President Enrique V. Iglesias signed the guarantees for the loans in a ceremony held on Friday. Iglesias and Guillermo Sol, president of Salvadoran state utility Comisión Ejecutiva Hidroeléctrica del Río Lempa, signed the loan contracts on Saturday.
The financing consists of a $30 million loan from the IDB’s ordinary capital and a soft loan for the equivalent in euros of $10 million from a Spanish fund administered by the IDB.
The loans are part of a $240 million package approved earlier by the IDB for the $320 million SIEPAC project (SIEPAC is the Spanish acronym for Electricity Interconnection System for the Central American Countries).
The other participants in SIEPAC – Costa Rica, Honduras, Guatemala, Nicaragua and Panama – have already formalized their loan contracts. With El Salvador’s signing, this project originally proposed three decades ago can now go forward.
SIEPAC will establish a regional power network and a wholesale electricity market among the six participating countries. A 1,830-Km, 230 kV transmission line will be built from Panama to Guatemala to achieve more reliable and higher capacity interconnections.
CEL’s partners in this venture are Costa Rica’s Instituto Costarricense de Electricidad (ICE), Guatemala’s Instituto Nacional de Electrificación (INDE), Honduras’ Empresa Nacional de Energía Eléctrica (ENEE), Nicaragua’s Empresa Nicaragüense de Electricidad (ENEL), Panama’s Empresa de Transmisión Eléctrica S.A. (ETESA) and ENDESA of Spain.
SIEPAC seeks to add the advantages of integration to the efforts made in recent years by Central American countries to upgrade their electricity systems. Over time, the regional wholesale market will allow qualified agents to buy or sell electricity anywhere in the isthmus.
The creation of a regional market with clear, standard rules is expected to provide incentives for the establishment of larger and more efficient generating plants fed by cleaner fuels. Such investments would help cut electricity costs, strengthen energy supply systems and reduce the environmental impact of power generation.
Future connections will link the SIEPAC with the power grids of Mexico and Belize, setting the foundations for the integration process proposed by Plan Puebla Panama, an initiative to promote sustainable development in the Central American countries and southern Mexico.