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Honduras to join regional electricity market

Honduran and IDB authorities sign $22.9 million financing agreement in support of SIEPAC, Central America’s electric interconnection system

TEGUCIGALPA, Honduras – With Honduran President Porfirio Lobo Sosa as a witness of honor, Finance Minister Wilfredo Cerrato and Inter-American Development Bank President Luis Alberto Moreno signed an agreement for $22.9 million in financing for a project to upgrade Honduras’ power infrastructure and support its participation in Central America’s regional electricity market.

The regional electricity market, known by its Spanish acronym MER, was established under a framework agreement among six Central American countries in order to optimize the use of their energy resources and reduce electricity costs by taking advantage of economies of scale.

All six countries are also partners in SIEPAC, the Central American electric interconnection system. The IDB contributed $271.5 million in loans to finance the construction of the system’s 1,793-kilometer power transmission line.

The new financing provided by the IDB to Honduras will support a project to strengthen the regional network by building a permanent link to a line connecting the Honduran and the Guatemalan grids. The project will also finance institutional capacity building to enable the Honduran power utility, ENEEE, to participate effectively in the MER.

Under the project, a new substation will be built for the power line between San Buenaventura in Honduras and Panaluya in Guatemala. This will technically close the loop between the Honduran, Guatemalan and Salvadoran grids, making the regional network more robust.

In addition, ENEE will strengthen its management, as well as establish an electricity transactions unit in order to better participate in the MER.

Once the new infrastructure is completed and operational, regional electricity transactions are expected to triple by 2017.

The IDB financing consists of a 30-year, $16 million loan with a fixed interest rate plus a 40-year, $6.9 million loan with a fixed annual interest rate of 0.25 percent.

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