At a glance: Honduran presidential frontrunner’s energy roadmap

Xiomara Castro is set to become Honduras’ next president and the first woman to lead the country following Sunday’s presidential election.

At press time and with over half of votes tallied, the leftist leader of the Libertad y Refundación (Libre) party had 53.6% of votes versus 33.9% for conservative Nasry Asfura of the ruling Partido Nacional. Nearly 70% of 5.18mn registered voters went to the polls.

Castro is married to former head of state Manuel Zelaya, who was in office from January 2006 until June 2009 when he was ousted by the military amid a political crisis.

The former first lady, who already received congratulatory messages from Venezuela’s Nicolás Maduro and Nicaragua's Daniel Ortega, would take over from President Juan Orlando Hernández in January, ending his seven-year leadership.

To learn how energy policy may evolve under Castro’s four-year administration, BNamericas provides takeaways from her government roadmap.

One proposal calls for the state to represent 60% of power generation, “to guarantee continuity in supply and rate stability.”

In October, state-run hydro and thermo generation accounted for 19% and 1%, respectively, of the country’s installed capacity, which totaled 2,830MW.

The plan envisions that 70% of the energy matrix will be renewable, reducing dependence on fossil fuel imports.

Installed power generation capacity in Honduras in October (Source: Enee)

The state also will support “environmentally and socially responsible” renewable energy developers and “give priority” to those who provide service in remote communities.

“Large-scale projects for alternative energy production have brought a number of socio-environmental problems … they must be regulated,” the roadmap states.

[insight#1619729567407724516]

ENEE

Another pillar of Castro's plan targets financially hobbled state power company Enee and power distributor Empresa Energía Honduras (EEH), which have been a thorn in the side of the current government.

EEH, which signed a seven-year contract in 2016 with the government as part of efforts to help Enee, has been under scrutiny for alleged service shortfalls.

“In a mad rush to privatize everything and make everything a business, official policy … has been irresponsible. Instead of orderly technical planning and promoting projects capable of meeting forecast demands, the state concessions energy production without control,” the plan states.

It adds that there should be coordination between the private sector and civil organizations to push for foreign direct investment outside concessions.

Castro proposes sector reform that would include a financial sustainability plan for Enee and the revision and cancellation – after payment – of EEH’s contract in a bid to reduce technical and non-technical losses.

Earlier this year, congress authorized Enee to take on new debt for 9bn lempiras (US$373mn at today’s rate), which has drawn further criticism by some who argue that such injections of funds have not improved sector financials and losses.

In addition, the roadmap pitches replacing power purchase agreements with a build, operate and transfer scheme in what it argues would make power generation procurement transparent, as well as reviewing current contracts and concessions, and rethinking new financing models for Enee.

Castro’s planned regulatory and legislative changes may curtail the further unbundling of Enee’s generation and transmission duties, as mandated by the power framework law.

“Enee needs to be restructured, a strong reconstruction – financial and operation-wise. The loss and theft of electricity is something that they haven’t been able to rectify, and I think we might have to consider a complete sectoral reform,” Ricardo Castaneda, senior Honduras economist at think tank Instituto Centroamericano de Estudios Fiscales told BNamericas previously.

Enee financials show the company posted a net loss of 820mn lempiras in October versus a net loss of 217mn lempiras in the same month of last year.

In its last country report for Honduras, the IMF said “expeditiously improving governance in the public electricity company (Enee) and strengthening its financial situation will be key for fiscal sustainability and improving the business environment. Restarting the loss reduction strategy and containing the recurrence of arrears should be focal points.”

Also Read Millionaire losses, breaches of contract and advantageous laws for power generators, among findings of social audit to ENEE

Other sector proposals include subsidies for very low-income groups; a public investment program for strategic infrastructure, such as the construction of multiple use dams; the promotion of hybrid and electric vehicles; and drafting a state industrial policy and the establishment of incentives to develop clusters.

Finally, Castro looks to modernize and make transparent the legal framework and price calculation for the sale of fuels to the final consumer, along with reducing the price of fuels to the minimum regional average and advancing with biofuels.

Source: World Energy Council