Honduras’ Congress on Monday approved a breakup of the country’s state-controlled electricity producer, allowing private interests to invest in the semi-shuttered industry in an effort to stem the company’s losses and revitalize the ailing sector.
Under the terms of the legislation, backed by 95 of the country’s 128 lawmakers, ENEE (Empresa Nacional de Energia Electrica)will be broken into three separate companies – for generation, transmission and distribution – which will be open to private investors.
It was not immediately clear how much would be opened up, but the government would maintain a minority stake. The breakup must occur by July 1, 2015, at the latest, under the legislation.
The Honduras Electric Power Company known as the “ENEE”, currently generates electricity and also buys from independent producers. But the state-subsidized firm has faced losses of roughly $200 million a year, preventing it from investing in new projects.
“This legislation allows the participation of private actors in all of the electricity market to drive investment in the sector and respond to the demand for electricity that is key to the development of this country,” Emil Hawit, ENEE’s director, told the press.
Preliminary figures showed Honduras ended 2013 with a fiscal deficit of nearly 8 percent of its gross domestic product (GDP), and many analysts had expected the government to partly privatize the loss-making ENEE to help close that gap.
Last week, Honduras’ Congress approved a 2014 budget that seeks to nearly halve the deficit, bringing it down to 4.7 percent of GDP by the end of this year.
Until now, private investors have only been allowed to produce electricity that they must then sell back to ENEE.
The company produces just over 400 megawatts a year through its hydroelectric and geothermal plants, with the rest of the country’s energy needs footed by independent producers.