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IDB loan to strengthen electricity sector in Nicaragua

$45 million package will help the government of Nicaragua ensure the sustainability of the country’s electricity sector

The Inter-American Development Bank (IDB) has approved a $45 million loan aimed at enhancing the financial and operational sustainability of the electricity sector in Nicaragua.

With this package Nicaragua will improve the energy sector management and support steps to create a sustainable energy grid by promoting renewable energy sources, private investment and energy efficiency.

The project will seek to identify obstacles and solutions for entering the national electricity market, encourage improvements in new-generation contracting processes so as to stimulate competition and private investment through a legal framework with clearly defined rules. The goal is to achieve prices that reduce rates for consumers. The cost of supplying electricity in Nicaragua is now one of the highest in Central America, with an average rate of $20.27 per kilowatt hour (kWh).

Nicaragua will be able to improve the quality of utility service and control over supplies, normalization and formalization of customers. It will also reduce the frequency of cuts in service, gaps in distribution and energy consumption by implementing an efficient energy policy. The IDB financing will support the integration of regional electrical grids with the goal of increasing exchanges among countries connected to the Electrical Interconnection System (SIEPAC in Spanish).

The loan is composed of $22.5 million from the Fund for Special Operations with a grace period of 40 years and an interest rate of 0.25 per cent, plus $22.5 million in ordinary capital over 30 years, with a grace period of 5.5 years and a fixed uni-monetary interest rate.