MANAGUA – A new energy deal that will convert the mysterious Venezuelan- Nicaraguan oil company ALBANISA into the country’s largest energy provider is sparking concern and criticism by the opposition, which demands to know who stands to benefit from the deal and how much it will cost.
The Nicaraguan Energy Institute (INE) last week announced a new 15-year contract between energy provider Unión Fenosa and ALBANISA, which is obligated to provide 200 megawatts of power from the new Venezuelan plants installed during the past two years. The contract is estimated to cost between $370 million and $500 million, depending on how much oil costs fluctuate.
ALBANISA, or ALBA de Nicaragua S.A., is a secretive business linked to the family of President Daniel Ortega and Venezuelan state oil company PDVSA. The company, managed by Francisco López, the personal treasurer of the Ortega family and the Sandinista Front, handles untold millions in revenue from oil imports from Venezuela. It has been the subject of conjecture and criticism since it was formed in 2007.
Until now, ALBANISA has had no experience running an electrical company. The Venezuelan oil plants Che Guevara I, II, and Hugo Chávez I, II, were installed and have been administered by the National Electrical Company, ENEL.
The opposition, therefore, is demanding to know how the plants went from state control into private hands, and what Nicaragua has to gain from that transaction.
“When the power plants were being operated by ENEL, they were subject to revision by the authorities, such as the Comptroller General’s Office, because they were public. But now that this operation is in the hands of ALBANISA, they are not subject to any control or supervision by the state,” said opposition lawmaker Victor Hugo Tinoco, who met last week with INE president David Castillo to learn more about the controversial contract.
Tinoco added, “In few words, in the next 15 years there will be a $500 million [business] that will be unsupervised. There is no way of knowing what will be going on there. State property is now being managed privately, so this all passes into darkness. The situation lends itself to corruption and poor management.”
Tinoco, a former member of the Sandinista Front’s national directorate, warned the situation could also lend itself to hikes in consumer energy costs, which are already the highest in the region. Already, there is talk of another energy price hike of 4-5 percent next month, following a 4.6 percent hike in June. INE president David Castillo, however, defends the Unión Fenosa-ALBANISA contract as technically and economically sound.
He said the contract will assure that Nicaragua’s electrical system has the power it needs to prevent future blackouts. He says the newer ALBANISA bunker-oil plants will provide less expensive energy than some of older diesel plants that are in constant need of costly maintenance. In the short term, Castillo said, the ALBANISA plants should translate into a 20 percent lower energy bill for Nicaraguan households.
Energy Crisis Over?
When President Ortega took office in January 2007, Nicaragua had a monstrous 120 megawatt energy deficit, resulting in 4- 12 hour daily power-rationing blackouts. With the help of Venezuela, Cuba and Taiwan, the Sandinista government has installed 160 megawatts worth of new power plants, and will have another 100 megawatts of generation coming online before January 2010, according to INE.
The country is now able to meet its 500 megawatt energy demand and has a small energy surplus for the first time since 2005.
Thanks to the new Unión Fenosa-ALBANISA contract, the country should be on much steadier ground moving forward, according to Castillo.
“This gives us a more robust system,” Castillo told The Nica Times this week in an interview. “There are still some risks, such as the Managua Power Plant, which is 40 years old and generates 100 megawatts. That plant still causes regular problems, but it will be retired in the next two years.”
The ALBANISA contract for the next 15 years should also give the country some breathing room as it switches over to renewable sources of energy, Castillo said.
The opposition, however, still has a lot of unanswered questions about ALBANISA and the nature of its business dealings.
“Why is a private company that doesn’t have any experience in power production now have the plants that were previously being run by the state company with the most experience?” Tinoco said after meeting with Castillo this week for an explanation of the Unión Fenosa-ALBANISA contract.
“These plants were supposedly a donation of solidarity [from Venezuela], but now they are charging, and charging expensively.”
Though the ALBANISA contract may have come as a surprise to many, Energy Minister Emilio Rappaccioli foretold it in a 2007 interview with The Nica Times.
“The new power plants are being purchased by ALBANISA,” 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” (NT, Nov. 15, 2007).
Lack of Transparency
While the government claims it’s representing the country’s best interests by providing energy at “fair prices,” critics say the business model the Sandinistas are implementing could do more harm than good in the long run.
Since the government recently purchased 16 percent of Unión Fenosa, there is also some question as to whether the contract with ALBANISA is a conflict of interests.
Former Attorney General Alberto Novoa, who spearheaded the anti-corruption investigations against former President Arnoldo Alemán, told The Nica Times this week that “where there is confusion or a conflict of interests between the state and the government, and the ruling party and family, the situation becomes corrupted.”
The case of ALBANISA, he said, demonstrates that “the separation of state and party is an unfinished task in Nicaragua.”
“ALBANISA does not have any autonomy as a business, rather it represents interests that are personal and of the party,” Novoa said. “This creates unequal competition in the free market.”