Honduras anxious to diversify -- Enron to sign 60 MW PPA

1 June 2000

Enron Wind's Honduran subsidiary, Zond de Honduras, expected to sign a power purchase agreement (PPA) with Honduran state power company ENEE last month, Zond general manager Miguel Angel Matute says. The PPA would allow Zond to proceed with securing permits from the natural resources and environment secretariat (Serna) for the development of a 60 MW project at Cerro de Hula, 24 kilometres south of capital city Tegucigalpa.

The environmental impact of the plant would be minimal, Matute says, and getting the permits should not take more than three weeks, which would enable the company to complete the 18 month construction period by end 2001.

The International Finance Corporation (IFC) will finance 75% of the project and once the PPA is signed, Zond will continue negotiations with US and Honduran partners to take a 25% equity stake. California based Enron Wind will provide the equipment, while other Enron subsidiaries will undertake construction. Although the concession area covers 210 square kilometres, micrositing to concentrate the plant into a smaller area has already been completed, Matute continues.

The project would be the first wind power generation scheme in Honduras. A few years ago hydroelectric sources accounted for 90% of the country's generation, with thermoelectric sources providing the balance. The government is seeking to reduce this dependency, says Glenda Castillo, an executive with ENEE. The hydro/thermal balance is now roughly 50-50.

The government remains keen to further diversify and offers a number of financial incentives for wind and other renewables. Generators can import study and construction machinery and materials tax free, are excluded from sales tax on those items as well as services when bought nationally, are given duty free import permits for construction machinery that will be in the country only temporarily, and are exempt from taxes on profits for the first five years of operations.

Furthermore, renewable generators with up to 450 MW installed capacity can sell to ENEE for 10% more than their short term marginal costs, which Congress fixed at the end of April at $0.074/kWh during peak time (about four hours a day), $0.062/kWh for semi peak demand (eight hours) and $0.048/kWh for off peak (12 hours). The maximum PPA term permitted is 20 years.

The government is currently in the process of privatising ENEE, but as the Zond project is already in place any agreement that ENEE and Zond reach will be honoured, Matute says.