Wind Energy in Central America: Potentials and Project Implementation. Rodrigo Mata, C.E. & M.B.A.

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“Wind Energy in Central America:

Potentials and Project Implementation” ”

Rodrigo Mata, C.E. & M.B.A.

11/20/2012

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Content overview

I. Economical context in Central America

II. Regional electricity market overview

III. Wind energy market in Central America IV. Wind project implementation

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I. Economical context in Central America

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1.1 Geographical location & economy overview

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Costa Rica Costa Rica Costa Rica

Costa Rica PanamáaPanamáaPanamáaPanamáa Nicaragua

Nicaragua Nicaragua Nicaragua Honduras

Honduras Honduras Honduras

El Salvador El SalvadorEl Salvador El Salvador Guatemala

Guatemala Guatemala Guatemala

Economical Indexes Costa Rica El Salvador Guatemala Honduras Nicaragua Panamá

Country Area (km2) 51.100 21.040 108.890 112.492 130.700 78.200

Population (thousand of people) 2011 4.703 6.262 14.729 7.773 5.896 3.562

GDP*1 (millions of US$ 2011) 40.870 23.054 46.898 17.446 9.317 31.075

GDP % increase 4,2 1,4 2,8 2,8 4,5 7,6

GDP per capita 8.690 3.682 3.184 2.244 1.580 8.724

Source:

Country area: Proyecto ARECA, BCIE 2009

Population, GDP, GDP increase (%) and GDP per capita is based on Statistical Yearbook, CEPAL 2011

*1 GDP: Gross Domestic Product

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1.2 Economical indexes for Central America

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Indexes Costa Rica El Salvador Guatemala Honduras Nicaragua Panamá

Country Risk (Moody´s Investor) Baa3 Ba2 Ba1 B2 B3 Baa2

Perspective Stable Stable Stable Stable Stable Positive

Source: Moody´s Investor Services, 2012

0,744 0,674 0,574 0,625 0,589 0,768

High Medium Medium Medium Medium High

Human Development Index 2011

Source: Human Development Index: HDI, PNUD 2011

4,34 3,80 4,01 3,88 3,73 4,49

57 101 83 90 108 40

Global Competitiveness Index, 2012-2013

Source: Global Competitiveness Index: World Economic Forum 2012-2013

Political Rights Index 1 2 3 4 5 1

Civil Liberty Index 1 3 4 4 4 2

Freedom Status ^Free ^Free Partialy Free Partialy Free Partialy Free Free

Source: Political Rights & Civil Liberty: Freedom House Organization, 2012

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II. Regional electricity market overview

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2.1 Energy demand in Central America

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Guatemala 8.623

El Salvador 6.216

Honduras 7.880

Nicaragua 3.577

Costa Rica 10.156

Panama 7.932

TOTAL 44.384

Energy demand 2012 (GWh)

Source: Consejo de Electrificación América Central, CEAC 2010

Centroamérica Costa Rica El Salvador Guatemala Honduras Nicaragua Panamá 61%

95%

57% 53%

46%

30%

57%

39%

5%

43% 47%

54%

70%

43%

Energy demand by source, 2011

Fossil source RE source

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2.2 Total power installed in Central America

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Source: the author.

Power capacity by source, 2012

Fossil source RE source

Centroamérica Costa Rica El Salvador Guatemala Honduras Nicaragua Panamá 53%

73%

54% 51%

38% 32%

50%

47%

27%

46% 49%

62% 68%

50%

Country Power (MW) C.F. (%)

Guatemala 2.455 40,10%

El Salvador 1.480 47,95%

Honduras 1.636 54,98%

Nicaragua 1.073 38,06%

Costa Rica 2.606 44,49%

Panama 2.049 44,19%

TOTAL 11.299 44,84%

Total power installed, 2012

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2.2 Electricity market growth expectations

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Average growth rate expectations for Central America energy market, 2012-2025

Energy demand projection for Central America, 2012-2025

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2.4 Penetration of Renewable Energy in Central America

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Source: Climascopio. BID & Bloomberg, 2012

*1 Not include PE Cerro Hula (102 Mw)

*2 Not include PE Blue Power (40 Mw)

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2.5 Average retail price of electricity in Central America

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Source: Climascopio. BID & Bloomberg, 2012

Wind energy tariff in Central America

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2.6 Renewable energy potential in Central America

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RE Source Costa Rica El Salvador Guatemala Honduras Nicaragua Panamá Total

Hydro 6.474 2.165 5.000 5.000 1.760 2.341 22.740

Geothermal 865 333 1.000 120 1.200 40 3.558

Wind 600 Under research 400 200 600 400 2.200

TOTAL 7.939 2.498 6.400 5.320 3.560 2.781 28.498

Source: BCIE Proyecto ARECA, 2009

Renewable energy power identified in Central America by source (MW)

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2.7 Regional electricity Market (MER)

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Source: Memoria Labores EOR 2008-2009

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2.7 Regional electricity Market (MER)

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Source: Memoria Labores EOR 2008-2009

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III. Wind energy market in Central America

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3.1 Central America Wind Power Potential

Wind power potentialin Central America (MW) Overview

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Source: BCIE Proyecto ARECA, 2009

• Complex sites

• Wind speed is heterogeneous in Central America.

• Not availability of good wind

databases.

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3.2 Wind farms in Central America

• Capacity Factors between 32% up to 45%

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Wind Farm COUNTRY PUESTA EN

SERVICIO

WEC

Manufacturer WEC MODEL Nº WECs

TOTAL POWER

(MW)

DEVELOPER OWNER

Aeroenergía Costa Rica 1998 Neg Micon NM48/750 9 6,75 Desarrollos Eólicos S.A. NA

Central Tilarán Costa Rica 1996 Kenetech USW33 55 19,80 Proyectos Eólicos S.A. PESA

Proyecto Eólico Guanacaste Costa Rica 2009 ENERCON E44/900 55 49,50 juwi Energías Renovables GDF Suez

Molinos Viento Arenal Costa Rica 1999 Neg Micon NM44/750 32 24,00 MOVASA ENEL Green Power

Tejona Costa Rica 2002 Vestas V45/660 30 19,80 ICE ICE

Valle Central Costa Rica 2012 ENERCON E44/900 17 15,30 juwi Energías Renovables Eólico Valle Central S.A.

Los Santos Costa Rica 2011 GAMESA G52-850 15 12,75 Coopesantos Coopesantos

Cerro Hula Honduras 2011 GAMESA G87/2000 51 102,00 Globeleq Mesoamérica Energy Globeleq Mesoamérica Energy Amayo Nicaragua 2010 Suzlon S88/2100 30 63,00 Energía Eólica de Nicaragua Energía Eólica de Nicaragua

La Fe - San Martin Nicaragua 2011 Vestas V80/1800 22 39,60 Infima Renovable Grupo Terra

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3.3 Guanacaste Wind Farm, Costa Rica

55 WEC ENERCON E44 Guayabo, Bagaces

Total power: 49,5 MW Energy: 240 GWh per year Owner: Suez Energy

Construction between 2007-2009 COD: December 2009.

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3.4 Amayo Wind Farm, Nicaragua

30 WEC´s Suzlon S88 Rivas, Nicaragua

Two construction stages:

40 MW & 23M

Construction Cost: US$149M Financed by BCIE

Energy price estimated:

US$8,625 cents

COD: 2010 for the second stage.

First Wind Farm in Nicaragua

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3.5 Cerro de Hula Wind Farm, Honduras

Largest Wind Farm in Central America.

51 WEC´s Gamesa G87 Total power: 102 MW

Located in Tegucigalpa, Honduras.

Construction cost: US$250M financed by US Export-Import Bank & BCIE

COD: December 2011.

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3.6 Wind power scenario for Central America

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Total Power Installed 2011

(MW)

Wind Power Penetration

10%

Wind Power Penetration

20%

Costa Rica 2.606 261 521

El Salvador 1.480 148 296

Guatemala 2.455 246 491

Honduras 1.636 164 327

Nicaragua 1.073 107 215

Panama 2.049 205 410

Total 11.299 1.130 2.260

Total Wind Power Installed

2011 (Mw)

Projects under development

(Mw)

148 250

0 42

0 15

102 75

103 80

0 158

353 620

Potential Market (MW) 10% Penetration

Potential Market (MW) 20% Penetration

-137 123

106 254

231 476

-13 150

-76 32

47 251

157 1.287

Other wind initiatives

(Mw) 80

0 110

0 40 374 604

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3.7 Wind projects in Central America

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Country Project Capacity

(MW) EPC - Developer

Costa Rica Los Leones 50 juwi

Costa Rica Orosí 50 Globeleq-Mesoamérica

Costa Rica Chiripa 50 Acciona

Costa Rica 7200 Law 100 To be defined

Nicaragua Eolo 40 Globeleq-Mesoamérica

Nicaragua Alba Rivas 40 ALBANISA

El Salvador Metapán-Santa Ana 42 La CEL

Panama Marañon 18 Unión Eólica Panameña

Panama Portobelo-Ballestillas 31 Unión Eólica Panameña Panama Rosa de los Vientos 50 Unión Eólica Panameña

Panama Nuevo Chagres 59 Unión Eólica Panameña

Honduras Grupo Terra 75 Grupo Terra

TOTAL 605

Wind Power under development in Central America, 2012

Country Project Capacity

(MW) EPC - Developer

Costa Rica 7200 Law 80 Varios

Panama Santa Cruz 74 Innovent

Panama Escudero 50 Helium Energy Panama S.A.

Panama Viento Sur 150 Helium Energy Panama S.A.

Panama Anton 100 FERSA

Guatemala Piedras Blancas 40 ND

Guatemala Buenos Aires 40 ND

Guatemala San Cristobal 30 Mesoamérica

Nicaragua Sierras de Managua 40 Mesoamérica

TOTAL 604

Other wind projects initiatives in Central America

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3.7 Incentives for wind project development

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• The incentives for new investment in Central America are heterogeneous.

• Countries with weaker incentives depend on the government intervention for the construction of new RE generation plants.

INCENTIVES ^GUATEMALA EL SALVADOR HONDURAS NICARAGUA COSTA RICA PANAMA Import tax exception

IVA exception IR exception

CER´s MDL tax exception

% RE awarded in biddings process

Transmission and Distribution Charges exception (10 MW) RE higher price

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IV. Wind project implementation

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4.1 Key factors for a wind project development

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Successful Project

Technical

Financial

Social &

Environmental

Legal

Pre-feasibility Project Charter

Environmental Examination

Feasibility

Final Design

Licenses

Construction

Preliminary Investment Preliminary

Investment

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4.2 Wind project development issues

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Source: Informe Competitividad Global, 2012-2013. Foro Económico Mundial

Issue 1 Issue 2 Issue 3 Issue 4 Issue 5 Costa Rica

Bureaucracy Infrastructure Financial

access

Corruption Fiscal norms

El Salvador

^Security ^Financial

access

Corruption Bureaucracy Political Instability

Guatemala

^Security ^Corruption Infrastructure Bureaucracy Labor Capacity

Honduras

^Security ^Corruption Bureaucracy Financial access

Taxes

Nicaragua

Bureaucracy Infrastructure Labor Capacity

Political Instability

Corruption

Panamá

^Corruption Bureaucracy Labor Capacity

Security Inflation Bureaucracy

Bureaucracy

Bureaucracy Corruption

Corruption Corruption

Corruption

Security

Security Security

Security

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4.3 Key challenges for wind project development

• Financial resources access

• Equity

• Energy price (not differentiation by technology)

• Insufficient transmission capacity & access to Transmission Lines

• Lack of long-term contracts

• Slowness in permits and licenses

• Technical limits in the system

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Source: Análisis y comparación de las normativas técnicas que aplican a los proyectos de generación de energía eléctrica por fuentes renovables de energía, BCIE 2010

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4.4 Project investment indicators for Central America

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Source: Proyecto ARECA, 2010

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Bibliography

• “Climascopio”, 2012. FOMIN-BID & Bloomberg New Energy Finance.

• “Análisis comparativo del desarrollo de energía renovables en América Central”, 2010. Proyecto ARECA – BCIE.

• “Análisis del mercado centroamericano de energía renovable”, 2009. Proyecto ARECA-BCIE.

• “Información del sector energético en países de América del Sur, América Central y El Caribe”, 2009. CIER.

• “Desarrollo y situación actual del sector eólico en américa Central”, 2012. Lic. Jorge Asturias O, OLADE.

• “Plan Indicativo Regional de Expansión de la Generación Periodo 2011-2025”, 2011. Consejo de Electrificación de América Central, CEAR.

• “Memoria EOR”, 2008-2009. Empresa Operadora de la Red.

• “Informe Competitividad Global”, 2012-2013. Foro Económico Mundial

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Thank you….

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Rodrigo Mata, C.E. & M.B.A.

Costa Rica

[email protected] (506) 8835-6172