MANAGUA – A financial crisis in the energy sector that threatened to result in more nationwide blackouts this month was staved off last week thanks to an emergency $2.9 bailout by Venezuelan-Nicaraguan oil company ALBANISA.
Despite the government’s promise of zero blackouts for December, the head of the country’s largest private power generator announced last week that his plant was on the brink of suspending operations due to a mounting debt with the private power-distribution company Unión Fenosa. César Zamora, head of Corinto power plant and president of the Nicaraguan-American Chamber of Commerce (AMCHAM), said his company first lent the embattled Spanish distributor $2 million in energy last year, but that the debt has since climbed to $4 million, and was on track to reach $9 million by the middle of December.
Zamora said Dec. 4 that his power plant had only enough fuel to continue providing energy through mid December.After that, he said, if Unión Fenosa doesn’t make payment on at least $2.9 million of its growing debt, Corinto power wouldn’t have enough money to buy the 50,000 barrels of crude oil needed to keep his plant running beyond Dec. 12.
“For seven years, we have never closed because of payment problems, but now we are in a critical situation,” Zamora said, adding that his company currently produces 63 megawatts of power for the national distribution system, or roughly 15% of the country’s total energy consumption.
“We don’t have the financial mechanisms to continue operating the plant,” he admitted. Antenor Rosales, president of the Central Bank, repeated the government’s promise of zero blackouts for December and stressed the importance of positive thinking.
“We have to create an environment that is positive; if we all think that it is going to be positive, we will have positive results,” he said hopefully. “I am sure we are going to resolve the problem of payment to the producers of energy.”
Unión Fenosa echoed that call, asking clients to pay their bills on time to ensure cash flow to the generators. The company acknowledged that it owed Corinto $3 million as of the end of November, but didn’t say how it planned to pay.
The answer came the following day, when ALBANISA sat down with Unión Fenosa and Corinto and agreed to buy out part of the power distributor’s debt, providing Corinto with the money needed to make its next oil purchase Dec. 12.
Structural Problem
Last week’s near-crisis in the energy sector shows how fragile the system remains, even though the blackouts have temporarily ended and things appear to have gone back to normal.
Zamora told The Nica Times that the energy sector’s problems are structural, involving both inefficient power-generation capabilities and serious financial problems.
Until now, he said, the solutions have always been “patchwork,” but in the mid-term they require a more integrated approach that deals with the grim reality that oil prices have doubled this year.
Zamora says a shipment of bunker oil that used to cost him $2 million in January, now costs around $4 million. Yet energy prices have not been adjusted accordingly, resulting in a $25 million deficit between what consumers are paying for energy and how much it costs generators to produce it.
That discrepancy has led to the cash flow problem, whereby Unión Fenosa doesn’t have enough money to pay the generators, and the generators don’t have enough money to purchase more oil, which fuels 80% of the country’s power production.
Emilio Rappaccioli, Minister of Energy and Mines, last month announced an incremental price increase of 9% in the energy bill over the next three months to avert a total “collapse” of the country’s energy sector and economy. He said that the price increase coupled with a $15 million subsidy from Venezuela would resolve the financial crisis and keep the energy sector on its feet (NT,Nov. 9).
Unión Fenosa, however, is reporting a $29.8 million deficit for November – higher than the original calculations predicted.
Zamora, too, claims that the government’s measures to adjust energy prices have not yet spelled relief for his plant, and now he’s on the brink of having to pull the plug.
Dialogue Needed
Zamora and Rosales said that a comprehensive solution to the energy problem requires successful negotiations between the government and Unión Fenosa – talks that first started seven months ago.
Since President Daniel Ortega, a longtime critic of Unión Fenosa and privatization of public utilities in general, came to power, Unión Fenosa has been vague about its intentions to remain here, not saying that that it wants to go but not saying that it wants to stay, either.
Ortega, meanwhile, has been more vocal on the matter.
“We never should have let Unión Fenosa (into the country); we never should have handed over distribution,” Ortega said Nov. 11 during a speech at the Inter-American Summit in Chile.
Ortega went on to accuse Unión Fenosa of having a “mafia attitude,” and said that the Spanish company was the leading deterrent to attracting investment in Nicaragua’s energy sector “because they don’t pay the generators; it’s that simple!”
Though there have been rumors of a government or private sector attempt to buyout Unión Fenosa’s contract, no offers have yet been made official, or at least public. But ALBANISA’s buyout of part of Unión Fenosa’s debt might be an indication of things to come.
