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Honduras to strengthen its power sector’s financial sustainability, efficiency with IDB support

$130 million loan will help implement sectorial policies and reforms 

The Inter-American Development Bank (IDB) has approved a $130 million loan to help Honduras strengthen planning, operation and control of its power sector

This initial operation will support the country’s efforts to implement sectorial policies and reforms aimed at boosting financial sustainability, operational efficiency, and energy supply security in order to enhance competitiveness and provide a better service to consumers. 

The power sector, one of the pillars of the country’s economic development, currently faces a number of challenges, including lack of a clear definition of its operating and regulatory institutions’ structures, as well as insufficient resources, which have pushed it to the brink of financial unsustainability and affected service quality, triggering fiscal, development and competiveness concerns. 

The project seeks to improve power sector efficiency by helping design and implement a regulatory framework that is conducive to diversification towards clean energy sources, generation-cost reduction, and adoption of policies that promote energy efficiency and greater integration of Honduras in the Regional Electricity Market. These moves will help overhaul the sector and reduce the Empresa Nacional de Energía Eléctrica’s (ENEE) significant losses, currently in the range of 31 percent. 

The IDB loan is spread over $91 million Ordinary Capital and $39 million from the Fund for Special Operations (FSO). The loan from ordinary capital resources is 30 years with a grace period of 5.5 years, while the FSO to 40 years with a grace period of 40 years and a fixed interest rate to 0.25 percent. The Executing agency will be the Finance Secretariat (SEFIN) in conjunction with other local entities. 

This is the first of a series of three consecutive, technically linked but independently financed programmatic operations.

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