Honduras project to proceed after delays

HONDURAS: The 102MW $270 million Cerro Hula wind farm in Honduras, which has experienced 16 years of setbacks, looks set to begin construction at the end of this year after a construction contract was signed and funding secured in the same month.

Spanish firms Gamesa and Iberdrola will build the farm for Costa Rican owner Mesoamerica Energy. The US government's Export-Import (Ex-Im) Bank awarded $158.5 million for purchases by three US firms that will supply the turbine equipment that will be installed on the site. This equipment represents more than half the total project cost.

Leonel Umana, the business developer leading the project, identified landholdings as the biggest hurdle the project has had to overcome in the 15 years since it was first proposed. "We have 15 to 20 people in Honduras working on nothing but land," he says. "We have spent $200,000 just paying for land, without counting salaries. That represents 50,000 man-hours since 2006."

As is the case with many South American nations, Honduras suffers from unreliable land registry records, and the land team has had to locate and register owners in order to complete purchase or rent transactions.

A change in ownership also caused delays. The project had been bought from Enron when it was liquidated, via General Electric. Integrating and fixing Enron's business had set Mesoamerica back by two years, Umana estimates.

Surprisingly, the Cerro Hula project was largely unaffected by last year's military coup in Honduras. As a result of the conflict, the European Union cut off all but basic poverty-relief financing to the nation and most South American nations ceased to recognise the new government that took office in January, following November elections. Nevertheless, the key players in the deal - the US, Costa Rica and Mexico - remain on friendly terms with the Honduras regime and political protests were limited to the nation's major cities, not the rural areas around Cerro Hula, which is around 24 kilometres south of Honduran capital Tegucigalpa.

Both the governments of ousted Manuel Zelaya and of Porfirio Lobo, who took office in January, have publicly backed the project. Ex-Im Bank did not cut off financing after the coup. In addition, as part of US policy to promote renewables, the loan will have more preferential terms than under normal lending.

The construction will be organised by the Mexican office of Iberdola Engineering and Construction. Ex-Im Bank is supporting the purchase of 51 2MW wind turbines from Gamesa Wind, a Gamesa subsidiary based in Pennsylvania; nacelles bought from ABB Power Industries based in Virginia; and rotor blades from LM Glassfiber in North Dakota.

At 20 years, Cerro Hula's power purchase agreements are longer than the typical 15. Nevertheless, Umana says that the prices paid for power are low, with a floor of just US$0.10/kWh. To illustrate this point, he says companies that burn fossil fuels have cut deals with the state monopoly, Empresa Nacional de Energia Electrica (ENEE), with a floor price of US$0.16/kWh.

There are no other developers working in Honduras that can match the resources deployed by Mesoamerica, although there has been a lot of interest from smaller groups. Mesoamerica's subsidiary, Energia Eolica de Honduras, is by far the largest wind firm, according to information published by the Honduran Association for Small Producers of Renewable Energy (AHPPER), the nation's main renewables body. However, Honduras might be poised for a boom in wind production if all the projects listed as at the "study stage" by AHPPER's website get off the drawing board.

Renewable 4 Energy Holding is researching five projects, each of around 50MW, in San Marcos de Colon, an administrative region around 190 kilometres from the capital that borders Nicaragua. There are four other individual projects on the drawing board, although no other is larger than 15MW.

In Central America, the best winds in are in southern Honduras, central Nicaragua and northern Costa Rica. Even so, the Cerro Hula winds do not match those measured in Costa Rica, where Mesoamerica runs Plantas Eolicas SRL, a 23MW wind farm. Umana estimates Costa Rican winds can regularly reach 13m/s, compared with 9-11 m/s at Cerro Hula.

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