NICARAGUA: CENTRAL AMERICA,S LARGEST WIND ENERGY PROJECT SET TO BEGIN OPERATION

UNCLAS MANAGUA 000166 SIPDIS E.O. 12958: N/A TAGS: ENRG EINV ECON SENV NU SUBJECT: NICARAGUA: CENTRAL AMERICA,S LARGEST WIND ENERGY PROJECT SET TO BEGIN OPERATION ¶1. (U) SUMMARY: On February 6, Ambassador Callahan accompanied officials from the American-Nicaraguan Chamber of Commerce (AmCham) and the Federation of Nicaraguan Business Associations (COSEP) to visit the Amayo wind power project, which is expected to begin supplying the Nicaraguan electricity grid by the end of this month. The Amayo project, located near Rivas on the shores of Lake Nicaragua, is the first wind power plant constructed in Nicaragua and is the largest wind project in Central America. The project consists of 19 wind turbine generators producing up to 40 megawatts of energy, which at full capacity could produce 8% of Nicaragua,s total annual energy needs. Amayo is 45% owned by Arctas Energy Group of Houston. Arctas considers the project location to have the best wind resource in Central America, and is already proposing an expansion designed to produce an additional 40 megawatts of power. End Summary. ¶2. (U) Ambassador Callahan joined AmCham officials Roger Arteaga (President),Cesar Zamora (Director),and Avil Ramirez (General Manager),and COSEP President Jose Adan Aguerri on a visit to the newly-constructed Amayo wind power project, slated to begin operation by the end of February. The Amayo wind power project consists of 19 wind turbine generators, each with a rated capacity to produce 2.1 megawatts of electric power. At its full capacity of 40 megawatts, Amayo will produce approximately 8% of Nicaragua,s current energy needs. Amayo is the largest wind project in Central America. The power it produces will diversify Nicaragua,s energy matrix, which currently depends on oil for 90% of its production. ¶3. (U) Ambassador Callahan was met at Amayo by officials of the project,s two primary developers, Arctas Capital Group of Houston and Centrans Energy Services, based in Guatemala. Arctas Capital, founded by former executives of Enron Corp., specializes in developing energy infrastructure projects in emerging markets. Centrans Energy has investments in shipping and electricity generation, and is one of the earliest developers of private power in Central America. Arctas and Centrans are partners in another Nicaraguan energy plant, the 70 megawatt barge-mounted diesel engine generating plant in the port of Corinto. The two companies each own 45% of the Amayo wind project (Consorcio Eolico Amayo S.A. -- CEA),with 10% owned by ENISA (Energia Eolica de Nicaragua),a local partner and the project originator. The total cost of Amayo is nearly $100 million, 75% of which is financed by a 15-year, $71.25 million loan from the Central American Bank for Economic Integration. ¶4. (U) The project developers gave Ambassador Callahan a tour of the facility and the wind turbines. The project,s location on the shores of Lake Nicaragua near Rivas allows it to take advantage of one of the best wind resources on the North American continent. The location features an average wind speed of 9 meters per second, with constant wind from the lake and low turbulence. These factors should result in an average price per kilowatt hour below the marginal cost of oil-burning power plants in Nicaragua. The project includes a substation and interconnection to an existing transmission line that traverses the project site and runs to the Costa Rican border. Amayo will supply 20 megawatts each, at an initial price of $86.25/MWh, to the two Nicaraguan subsidiaries of Union Fenosa that run the country,s electricity distribution system. Amayo estimates that the project will reduce Nicaragua,s import and consumption of fuel for energy by up to 216,500 barrels per year, saving the country from emitting approximately 122,000 tonnes of carbon dioxide per year -- carbon credits that Nicaragua will register with the UN Framework Convention on Climate Change. ¶5. (U) Nicaraguan government officials in the environmental, energy, infrastructure, and economic regulatory agencies have given broad support to the Amayo project. The Nicaraguan Minister of Energy and Mines, Emilio Rappaccioli, has stated that President Daniel Ortega will preside at the opening ceremony. Local media coverage of the Amayo project has been regular and positive. ¶6. (U) The Amayo Consortium (CEA) already has plans to expand the project and is negotiating options for land adjacent to the current site that would support an additional 40 megawatts of capacity. Were a bid extended quickly for an expansion, CEA projects that it could benefit from economies of scale provided by the current project and meet weather-related construction deadlines to potentially install new turbines within a year. The Nicaraguan Ministry of Energy, however, is taking a wait-and-see approach to the success of the project and the ability of the transmission line to handle the additional load. ¶7. (U) COMMENT: The Amayo wind energy project represents the efficient development of green power resources, which are potentially abundant but largely untapped in Nicaragua. Nicaragua relies almost exclusively on fuel for its power production. The official opening of the project will be a positive development in an otherwise difficult period for Nicaragua. Although the technology is almost exclusively produced outside of the country, Amayo represents a significant foreign direct investment. While the project created over 200 jobs during its construction, it will provide little in the way of long-term local employment, although the addition of a new, reliable power source is a positive development for the broader economy. CEA wants to move forward with an expansion project, but it is unlikely that the Nicaraguan government will extend a new bid in time for CEA to act on it and begin construction this year. CALLAHAN