VZCZCXRO6597
OO RUEHLMC
DE RUEHTG #1147/01 3170024
ZNR UUUUU ZZH
O 130024Z NOV 09
FM AMEMBASSY TEGUCIGALPA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1066
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE PRIORITY
RHMFISS/CDR JTF-BRAVO  PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RHEFDIA/DIA WASHINGTON DC PRIORITY
RUEIDN/DNI WASHINGTON DC PRIORITY
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC PRIORITY
RUEHTG/USMILGP TEGUCIGALPA HO PRIORITY
RUMIAAA/USSOUTHCOM MIAMI FL PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC PRIORITY 1248

UNCLAS SECTION 01 OF 02 TEGUCIGALPA 001147 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: BTIO EAID ECON ENRG ETRD SENV HO
SUBJECT: TFHO1: EXPANDING ELECTRICAL ENERGY ALTERNATIVES 
 
¶1.  (U)  Summary:  The National Electrical Energy Company of 
Honduras has re-issued a request for proposals for 250 
megawatts of renewable energy in a way that will allow small 
to medium-sized producers to compete with larger companies. 
Many small producers indicate they are ready to submit 
proposals.  Pricing and financing remain difficult for small 
producers.  Demand for electricity is down somewhat this year 
because of the global recession.  The terms of the request 
for proposals (RFP) were made available October 30; bids must 
be submitted by December 11.  This request for proposals 
focusing on renewable energy is both forward-thinking and 
pragmatic.  By structuring the RFP to make it more accessible 
to small- and medium-sized companies, ENEE can diversify its 
energy-generation assets and buffer itself from the vagaries 
of global market prices and dependence on a few large 
companies.  End Summary. 
 
¶2.  (SBU)  The Honduran National Electrical Energy Company 
(ENEE, for its initials in Spanish) issued a request for 
proposals in September for 250 megawatts of electricity from 
renewable sources.  Not long after, ENEE withdrew the RFP at 
the urging of the Honduran Association of Small Producers of 
Renewable Energy (AHPPER).  As explained to EconOff by Elsia 
Paz, president of AHPPER, the original RFP was withdrawn so 
it could be modified to make it more accessible to small 
producers.  Instead of one big block of 250 megawatts (MW), 
which would limit proposals to only one or two large energy 
producers, the new RFP allows for participation in lots of 
less than 10 MW, less than 20 MW, and greater than 20 MW, 
opening the doors to smaller projects.  Additional 
concessions were made in that contracts would be for 15 years 
for small producers, and 30 years for larger ones.  The new 
RFP was issued on October 30, with proposals due 40 days 
later.  Bids will be opened December 11, and contracts will 
be awarded before the January 29, 2010 Presidential 
inauguration. 
 
¶3.  (SBU)  Paz indicated that more than 45 AHPPER members had 
already requested the bid specifications.  Boris Arevalo, a 
member of the AHPPER board, told us that among its 65 
members, the association has already identified projects to 
produce 200 MW using renewable resources such as biomass, 
wind, and hydroelectric plants. 
 
¶4.  (SBU)  In the RFP, ENEE is accepting bids of between 8.6 
cents and 10.2 cents per kilowatt hour.  This would fall 
between current hydroelectric prices at 0.06 to 0.07 cents 
per kilowatt hour and oil-based thermal plants, running 
between 19 and 25 cents per kilowatt hour.  As reported in 
local press, Luis Larach, president of the Cortes Chamber of 
Industries and Commerce, expects that most renewable energy 
projects will need to charge 9 to 10 cents per kilowatt hour 
to meet their costs.  Some will need to charge more.  The 
prices small to medium producers will need to charge also 
depend on financing, which can be problematic.  A major 
lender for such projects, the Central American Bank for 
Economic Integration, has "paused" its lending to Honduran 
institutions since the coup of June 28. 
 
¶5.  (U)  This RFP comes at a time when ENEE is seeking to 
meet projected demand through options other than oil, as 
mandated by the 2007 Law to Promote the Generation of 
Electrical Energy with Renewable Resources.  It also comes at 
a time when a 50 MW coal-fired plant is significantly behind 
schedule.  While ENEE set the target of 250 MW based on 
internal projections of future need, it is currently 
experiencing slightly reduced demand.  Peak demand for 
electricity in 2008 was for 1,224 MW.  Peak demand to date in 
2009 was 1,203 MW.  The manager of Cortes Electricity, 
Salomon Ordonez, told the local newspaper La Prensa that the 
global economic crisis has been a greater factor in the 
reduction of demand than Honduras's political crisis. 
However, the political situation has had some impact.  Demand 
hit a low for the year of 1,151 MW in September.  This was 
seen as a direct result of the political chaos and extended 
curfews after the return of President Zelaya to the country 
on September 21. 
 
¶6.  (SBU)  Comment:  This request for proposals focusing on 
renewable energy is both forward-thinking and pragmatic. 
Many private and public leaders believe that Honduras could 
 
TEGUCIGALP 00001147  002 OF 002 
 
 
be a regional leader in renewable energy, which could draw 
even more investment in this economic sector.  At the same 
time, Honduras needs to find a way to avoid the 
unpredictability and high costs of oil, upon which it has 
become increasingly dependent for energy generation.  By 
structuring the RFP to make it more accessible to small- and 
medium-sized companies, ENEE can diversify its 
energy-generation assets and buffer itself from the vagaries 
of global market prices and dependence on a few large 
companies.  End comment. 
LLORENS