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Energy and Clean Energy in Central America

Investment Opportunities within the Region

Dr. Nick RischbiethExecutive President

Essential Facts of the Region• 9,033,399 users• 12,453 MW installed capacity • 5% increase per year during the past

5 years in installed capacity • 3.0 % energy consumption increase

per year during the past 5 years• 5,683,726 inhabitants without

electricity (Guatemala, Honduras and Nicaragua accounting for 85 % of the total).

• In 2012, 64.6 % of the Energy injected to the National Grids came from Renewable Energy (RE) sources.

• In 2012, 540 MW were added within the region, all coming from RE sources. This trend is expected to remain constant in line with market and environmental considerations.

Market Conditions in Central America

• New power capacity added to the National Interconnected Grids during the last years, predominantly from RE sources (+90%).

• Incentive laws in each and every country to promote RE investment for power generation purposes.

• Long term Power Purchase Agreements, 15+ years to ensure financial returns for investors.

• Acceptance of distribution companies or energy government agencies of renewable energy during operation (avoiding intermittence issue)

• Regional infrastructure that allows energy transactions within the whole region. Just recently the Central American Electrical Integration System (SIEPAC) has been put into operation.

Central American Electrical Integration System

Geothermal Potential in the Region

According to a 2009 study, geothermal potential for power generation in Central America is estimated to be of 3,900 MW and more than 50 sites have been identified

for eventual development

Country Potential (MW)

Identified Sites

Installed Capacity (MW)

Costa Rica 900 10 218

El Salvador 700 13 204

Guatemala 1,000 13 49

Honduras 100 7 -

Nicaragua 1,200 10 165

Panamá N/A 5 -

Total C.A. 3,900.00 58 636

Source: LaGeo and CEPAL

Only 16% of the potential is being exploited

Hydropower Potential in the Region

Only 24% of the potential is being exploited

Country Potential (MW)

Installed Capacity (MW)

Costa Rica 5,802 1,700

El Salvador 2,165 487

Guatemala 5,000 986

Honduras 5,000 538

Nicaragua 1,760 105

Panamá 2,341 1,479

Total C.A. 22,068 5,295

Source: CEPAL

Wind Power Potential in the Region

Source: Swera and CEPAL

Country Good to Excellent

Potential (MW)Installed

Capacity (MW)

Costa Rica 2,880 148

El Salvador 6,880 -

Guatemala 7,840 -

Honduras 10,860 102

Nicaragua 38,065 146

Panamá N/A -

TOTAL 66,525 396

During the dry season wind power provides up to 35% of electricity in Nicaragua

Only 0.6% of the potential is being exploited

Solar Potential in the Region

C.A. as a whole has an average radiation that ranges from 1,440 (4 hours per day) to 2,340 (6.5 hours per day) during peak hours.

Radiation of at least 4 peak hours per day is considered a profitable investment when bearing in mind the electricity costs in the region.

Percentage Distribution of Energy Generation in the Region - 2012

Guatemala El Salvador Honduras Nicaragua Costa Rica Panama

65% 60%44% 42%

92%

64%

35% 40%56% 58%

8%

36%

Non-renewable Energy

Renewable Energy

Source: CEPAL

Private Investments within the Power Generation Sector

2008 2009 2010 2011 2012

3,925.40 3,887.60 4,364.60 4,493.10 4,452.50

6,298.10 6,819.00 6,840.80

7,429.50 7,995.30

Public Installed Capacity MW Private Installed Capacity MW

Source: CEPAL

CABEI’s Impact in the Energy Sector

General Information on CABEI Development Bank founded on December 13, 1960 with

the objective of promoting the economic integration and balanced economic and social development of its founding countries.

Currently the Bank has 13 members, as follows:

• Five Founding Members: – Costa Rica– El Salvador– Guatemala– Honduras– Nicaragua

• Two Non-Founding Regional Members: – Panama(*)– Dominican Republic(*)

• Five Non-Regional Members:– Republic of China (Taiwan), Mexico,

Argentina(*), Colombia(*) and Spain

• One Beneficiary Country:– Belize

(*) These countries are also benificiary countries.

Nicaragua

Costa Rica

HondurasBelize

El Salvador

Guatemala

Founding MembersNon-Founding MembersBeneficiary Country

Colombia

Mexico

Argentina

Spain

DominicanRepublic

ROC (Taiwan)

Nicaragua

Costa Rica

HondurasBelize

Panama

El Salvador

Guatemala

In 53 years of history, CABEI has been the main promoter of development in the Central American region:

• The Bank has financed more than 2,800 operations in the sectors of road infrastructure, energy, healthcare, education, water and sanitation, MSME, agriculture and rural development, housing, industry and tourism.

• CABEI has expanded its field of action to include Belize, Panama, Dominican Republic, Colombia and Argentina as beneficiary countries.

• In 2009, CABEI increased its authorized capital from US$2.0 billion to US$5.0 billion in order to attend the region’s increasing need for financing. To that end, it developed a new strategy for the 2010-2014 period.

CABEI: More than 53 Years of History

CABEI ‘s Long-Term Ratings History (2002 – 2013 )

14

CABEI Continues to Improve its Credit RatingFactors Supporting the Ratings:

Sound asset quality High liquidity Strong capitalization Conservative financial

policies / strict credit policies

Sustained growth Diversified fund procurement Continued support from

international community Demonstrated shareholder

support

Multilateral / preferred creditor status

CABEI’s Focus Areas

CABEI´S

ROLE in

ENERGY:

“To Provide financial solutions to promote energy efficiency, boosting the development of energy sources in Central America”

1. Productive Infrastructure

2. Energy

3. Financial Intermediation

and Development

Finance

4. Agriculture and Rural

Development

5. Human Development

and Social Infrastructure

6. Industry, Urban

Development and Services for Competitivenes

s

Initiatives in the Energy Sector

Power generation with renewable sources

Biofuels from sources that do not jeopardize food security

Transmission and Distribution projects including rural electrification

Energy Efficiency

Projects that improve the Structure, Diversity and Efficiency of the countries Energy Matrix

Power generation from Non-renewable Energy sources, essential for Governments (E.g. Emergencies, unexpected meteorological conditions, etc.)

More than 170 projects with a

total investment of more than US$2.9 billion)

64% Renewable19% Energy

Infrastructure (SIEPAC)

Approximately 4,505 MW

Equivalent to 36% of the

installed capacity in the Central

American region

More than 30 million tons of

reduction in greenhouse

gases

Public sector 72%

Private sector 28%

CABEI’s Experience in the Energy Sector

Hydropower

Palomino HP in Dominican Republic

CABEI’s Experience in the Energy Sector

Pailas Geothermal Plant in Costa Rica

Wind Power

Wind Farm Cerro de Hula in Honduras

Wind Farm Amayo in Nicaragua

Solar Power

Solar Plants to be built in El Salvador and Honduras

Xacbal HP in Guatemala

Geothermal

What We Offer

Sectors

• Public

• Private

• Financial

Financial

Schemes

• Pre-investment and Grants

• Direct Investment (Direct Loans, Co-financing, Syndicated Loans, BLT´s)

Programs and

Products

• Energy Efficiency

• Renewable Energy

• Energy Infrastructure

CABEI has approved more than US$2.9 billion dollars in Energy Projects in 8 Countries

Net Approvals per Sector(percentages)

20

1.7 0.6

35.4

6.18.423.4

19.05.4

General Dist. Biomass Hydraulic Wind Geothermal Thermal Transmission Lines Hydrocarbon

Current and Future Projects

• CABEI expects to approve US$360 MM during 2014 in the Energy sector (25% of the Bank´s investment portfolio).

• Projects to be funded during 2014: Wind Power, Hydro, Geothermal and Private investments (mainly in Honduras) due to the Deregulation of the Transmission and Distribution lines.

Future Projects and Trends

• Stronger links with National Goverments, other Multilaterals (IADB, WB, CAF) and Bilateral Financial Institutions (KFW) will lead to new projects, such as:

(a) Joint Geothermal Development Facilities to boost investment within this renewable energy source.

(b) Distribution Generated Energy with help of solar technology and a considerable increase in solar energy interconnected to National Grids capable of supplying neighbouring countries through existing infraestructure.

(c) New power additions from Wind Power throughout the region.

(d) Introduction of Natural Gas as a cleaner and more efficient source of Energy, displacing Bunker fuel.

Conclusions• CABEI is committed to financing RE energy projects and maintaining its

position as main financial provider of the Central American region.

• CABEI will maintain its support to national and regional interventions such as those identified within the Central American Integration System and Mesoamerica Project.

• New power generation will come, most likely, from RE investments due to market and environmental considerations.

• Every single country in the region has opened the power generation sector to private investors.

Conclusions

• Deregulated Energy Markets in Guatemala, El Salvador, Nicaragua and Panama, will allow investments in power generation, distribution and high voltage transmission (only GUA and ES allow private investments in high voltage).

• Honduras is currently deregulating its Energy sector with a clear decision to allow investments in Transmission and Distribution (currently only the power generation sector is open to private investments).

• The introduction of RE will need investment from distribution/energy related companies in order to cope with the intermittence issue of these technologies.

• US$1.5 billion per year will be required to fulfill energy investment needs in the region.

Thank youCentral American Bank for Economic Integration