The Inter-American Development Bank today announced the approval of $12.5 million in financing for a project to strengthen Nicaragua’s power transmission system.
The project, which will be executed by the state-owned Empresa Nacional de Transmisión Eléctrica (ENATREL), entails investments in power transmission (construction of lines and expansion of circuits) and transformation (increasing transforming capacity and voltage compensation equipment), as well as the institutional strengthening of ENATREL (planning tools and training for the expansion of power transmission and operational security).
The investments will increase the reliability of Nicaragua’s grid, for both operating the national power system and conducting electricity transactions with neighboring countries using existing connections. In the short term, investments will buttress Nicaragua’s ability to complement its own generation with electricity obtained through the regional market.
The reinforcement of the network is also part of Nicaragua’s plans as a member of SIEPAC, the Central American electrical interconnection system. Together with other state-owned utilities from Costa Rica, El Salvador, Guatemala, Honduras and Panama, plus Endesa of Spain and ISA of Colombia, ENATREL is a partner in the construction of SIEPAC’s regional power transmission line. This project, which broke ground last year, will further expand electricity trading among Central American nations.
The financing approved by the IDB consists of a $6.25 million loan for a 30-year term, with a 5.5-year grace period and a variable interest rate, and a $6.25 million loan for a 40-year term with a fixed interest rate of 0.25 percent a year.
This is the first operation under new financing guidelines established earlier this year after the IDB approved deep debt relief for some of its poorest and most heavily indebted borrowers. Under the arrangement, Nicaragua receives half of the financing on market terms and half in highly concesional terms.