MANAGUA – Nicaragua’s precarious energy sector this week announced mixed tidings to harried consumers.
The good news is that the longstanding power-rationing blackouts are scheduled to end Dec. 1; the bad news is that the price of electricity is going to increase 9% during the next three months.
Although the date for ending the daily blackouts has been rescheduled several times due to technical problems at various power plants, Emilio Rappaccioli, Minister of Mines and Energy, announced that the blackouts will be reduced by half by Nov. 15, and eliminated altogether by Dec. 1. Already, a minor increase in the country’s power production in mid-October has ended the daily blackouts in downtown Granada.
The expected end to the power-rationing will be thanks to a substantial boost in energy production from three plants that are scheduled to come back online in the coming week to cover the current deficit of 80 megawatts, equal to 16% of the country’s total energy demand.
The first plant to return to the grid is the aging ORMAT/MOMOTOMBO geothermal plant, which has been under repair for several months and is now ready to start producing 27 megawatts of power. By mid-November, the Grupo Pellas San Antonio cane-burning plants will come online to produce 60 megawatts during the cane-harvesting season.
And by the end of the month, the hydroelectric plant at ApanasLake, which is currently producing at 60%, is scheduled to have an additional output of 25 megawatts –or around 90% of its total output capacity.
The return of those three plants will allow the energy sector to increase its total output by 112 megawatts, thereby covering the deficit with a small reserve to spare for the first time in more than a year.
Rappaccioli, however, hedged his announcement by saying that the system will remain “fragile” and that any additional technical problems – such as the type that have occurred almost constantly during the past year – could mean a continuation of the power rationing beyond Dec. 1.
Paying the Piper
Along with the increase in power will come an increase in consumers’ electrical bill, according to the Nicaraguan Energy Institute (INE), the state regulatory agency.
Due to soaring petroleum prices, which have more than doubled since the beginning of the year, the energy sector – which produces close to 80% of its power from petroleum – is in a dire economic situation, according to Rappaccioli.
The minister explained that the difference between what consumers are paying and the actual cost of energy has resulted in a deficit of $25.6 million, which is calculated to reach $29 million by December – an amount the energy sector can no longer sustain.
“We have to do it [raise prices]; we’re obligated,” Rappaccioli explained. “If we don’t, the whole system of generators and distributors could collapse and that would mean a collapse of the economy.”
Rappaccioli noted that one power plant was already forced to close temporarily because it could no longer afford to buy petroleum at the price it was selling its power to distributor Unión Fenosa.
To prevent further shutdowns, INE has authorized an incremental increase in the electricity prices starting Nov. 1, with a 3.5% hike. In December, the price will go up again by 2.5%, and then again by 3% in January. The price increase will not affect clients who consume less than 150 kilowatt-hours (kWh) per month, or roughly 70% of Unión Fenosa’s 650,000 clients.
Economists say the agricultural and productive sector will be hit hardest by the price jump, which could translate into an additional increase in the cost of already inflated basic items.
Inflation, before the announcement of the electricity price hike, was already “optimistically” calculated to finish the year around 11-12%, according to independent economist Nestor Avendaño. That calculation will have to be readjusted again in the coming weeks.
Yet even with the 9% price increase over the next three months, the energy sector will still be running a $15 million deficit, according to government calculations. The difference will be provided in the form of a four-year credit from the Venezuelan-Nicaraguan oil company PETRONIC/ALBANISA, which will collect on its debt in the future once several new renewable energy plants come on line in the coming years, according to Rappaccioli.
If it weren’t for the subsidizing loan, the government would be forced to raise electricity prices by 16-18%, which would have a tremendously negative impact on the economy, Rappaccioli said.
Brighter Days Ahead
Work is already under way to dramatically increase Nicaragua’s power supply over the coming years, with thermal plants in the short term and renewable-energy plants in the mid-term.
Construction has already started in Managua and Masaya to install a 60- megawatt oil plant provided earlier this year by Taiwan and Venezuela, and a 120-megawatt plant provided by Cuba and Venezuela. The first plant is expected to go online by next March or April, and the second by September.
Those projects will help ensure that the country’s energy demand – expected to grow next year by 8%, or 40 megawatts – will be easily covered, and give the energy sector a little more breathing room. By mid-2008, the energy rationing blackouts that have plagued Nicaragua for nearly two years should be a thing of the past.
After the two new oil plants come online, work will begin on seven more renewableenergy projects – geothermal, hydroelectric and wind – that are scheduled to come online between 2009-2011, providing an additional 180 megawatts of power.
Once completed, those projects will be able to produce less expensive, renewable energy, thereby lessening the country’s demand on foreign petroleum and hopefully allowing INE to again adjust electricity prices accordingly.
In the longer-run, there are several larger geothermal and hydroelectric projects representing another 300 megawatts of power that are awaiting government approval to start exploring possibilities here, according to the Ministry of Energy and Mines.
The day after President Ortega took office Jan. 10, Venezuelan President Hugo Chávez boldly told a group of business leaders here that Nicaraguans could “forget about its oil problems.”
Ten months later, Nicaragua’s petroleum problems continue and some people are starting to question the nature of the government’s oil venture with Venezuela.
Eduardo Montealegre, leader of the opposition Nicaraguan Liberal Alliance (ALN), is demanding that President Ortega explain the details of what he is calling the “The Great Swindle” by Chávez and Ortega.
What is known about the nature of the business is that Venezuela provides the petroleum directly to Nicaraguan oil distributor PETRONIC, which then resells the petroleum to other oil companies in Nicaragua.
PETRONIC then transfers 100% of its revenue to ALBANISA, a joint private company between Venezuela and Nicaragua.
ALBANISA is 60% owned by Venezuelan state oil company PDVSA, and 40% by unknown partners in Nicaragua.
ALBANISA then pays 50% of the earnings back to Venezuela for the petroleum, and contributes 25% to a special social fund controlled by the Bolivarian Alternative for the Americas (ALBA), an alternative trade and development fund between Nicaragua, Cuba, Bolivia and Venezuela.
ALBANISA, therefore, holds onto the remaining 25%, raising questions about where that money is and who controls it.
“Who are the real partners in ALBANISA and where are the earnings from the sales by PETRONIC?” demanded Montealegre, who calculates that the company’s take on oil sales this year is already at $30 million.
Montealegre accuses Ortega of lying to the Nicaragua people by saying that Nicaragua will benefit from the deal with Venezuela, which he says is only set up to create a small group of Sandinista nouveau riche.
ALN lawmaker Pedro Joaquin Chamorro adds that he is concerned that the ALBANISA oil profits will go to fund the Sandinistas’ municipal campaign efforts next year.
Rappaccioli, however, tells The Nica Times that the ALBANISA funding is being reinvested in the country’s energy sector.
“The new power plants are being purchased by ALBANISA, which is also developing the oil refinery,” he said. “They are the ones who are putting the money down to buy these plants and they will get their money back over 15 years with money from the new power that is generated at accessible and fair prices.