Five foreign companies that have invested in renewable energy in Honduras have submitted at least five notices of intent to submit their cases to international arbitration alleging discriminatory treatment, including failure to pay bills for months and outright threats for expropriation.
The public announcements open a period of consultation with the Honduran government, which could be the last chance to build an agreement and avoid costly litigation for the Central American country.
Also read: Check out our coverage in Honduras
Bloomberg Línea revealed from sources connected to the national electricity sector that the amount in dispute under the possible arbitration would be more than 300 million US dollars, a value similar to the total investment announced to strengthen the transmission network throughout the country during the decade 2022-2031.
In late October, Energy Secretary and interim general manager of the National Electric Power Company (Enee), Erick Tejada, told local media that he had received a notice of intent to arbitrate under the Free Trade Agreement between the States United States, Central America and the Dominican Republic. Republic (DR-CAFTA).
Then, the official indicated that there were two energy producing companies and that this situation came as a result of the renegotiation of the energy contracts that the government made in the framework of a re-establishment project, the main objective of which is to save and strengthen public institutions, mainly state. the electricity company.
ACTIONS TO RESCUE THE ELECTRICITY SECTOR
At the start of her term, President Xiomara Castro said that Enee was a “fiscal hole of insurmountable dimensions in the short term” and that it went beyond energy. “It is a social and economic problem”, for which she warned of a series of measures to deal with it.
When the new government management began on January 27, 2022, Enee’s non-technical losses, referring to non-payment by users, were 38% of generation, the second highest figure in Latin America, behind only Haiti. according to the Latin American Energy Organization (Olade).
However, for specialists, the policies implemented in the first nine months of the government have not advanced in solving the problems of the state society nor of the electricity sector in general.
Economic and political analyst Roberto Lagos recalled that when, in his inaugural address, Castro spoke of debt restructuring instead of “refinancing,” as Secretary of Economic Development (SDE) Pedro Barquero later clarified, the country’s danger to Honduras was increases significantly.
Then, through the Special Law on guaranteeing electricity service as a public good of national security and a human right of an economic and social nature (Decree 46-2022), approved last May, “the issue of the value of right, but when you start to review what it consists of, you can’t find any technical document that guides or explains what this fair value mechanism consists of,” Lagos said.
According to him, with the lack of technical capacities of the authorities responsible for the energy sector of Honduras, “a process begins, a more ideological story, but without technical bases”.
RENEGOTIATION OF CONTRACTS
The law declaring energy a public good also authorized the renegotiation of the contracts and prices at which the state, through Enee, purchases power and energy supplies from power plants, particularly in terms of fixed tariffs that include operation, maintenance and profit reasonable. , and variable charges consisting of fuel, operation and maintenance.
“If renegotiation is not possible, it is authorized to propose the termination of the contractual relationship and the purchase by the state, before the fair price”, the law states.
In early October, the Government of the Republic signed an agreement to renegotiate at least 16 contracts with 14 electricity generating companies in Honduras, which is 55% of what was proposed in contracts that state authorities consider overpriced.
For Lagos, the government “has been selective with the companies it has negotiated with and has not internalized the risks that an arbitration process may have for the international market and for attracting investments not only in the energy sector, but also in other sectors. So the point is that the plan is being addressed, but it is not being done properly. First, the problem of energy losses had to be addressed,” he said.
LACK OF ELECTRICITY SUBSIDY REVIEW
The government also announced “free energy” for 1.3 million people with consumption of less than 150 kilowatts (kW), as an anti-poverty measure that covers 74% of homes, according to the National Institute of Statistics (INE).
“In our country, given the budgetary and fiscal limitations we have, which came from a pandemic and from an unsafe situation in which the previous management left us, a subsidy process is being carried out, which should not have been done. way, but it should have been done in a more focused way,” Lagos said.
According to the expert, the Government should first identify the 400,000 poorest families in the country, “and offer these people subsidies because this would affect the stability of public finances, and then try to see how the new families are incorporated identified”. However, many of the people who are benefiting are not necessarily in the lowest income quintiles.
RENEWABLE ENERGY IN HONDURAS
Honduras, the country with the third lowest Gross Domestic Product (GDP) per capita in Latin America according to the World Bank, has been a model of renewable energy development in recent years.
Since 2014, the generation matrix was transformed and the country sought to have an energy matrix dominated by renewable sources; hydraulic, wind, solar, geothermal and biomass. The National Plan stipulates that by 2022, 60% of national demand would be supplied by renewable sources.
With information from Bloomberg Línea
