LaGeo Could Lose Concession in El Salvador

The mixed ownership company for geothermal power generation has failed to deliver the power levels cited in the concession contract for the past 3 years.

Tuesday, October 25, 2011

LaGeo is jointly owned by Italy's Enel and the Salvadoran state through the Executive Hydroelectric Commission of the Lempa River (CEL), and is the subject of litigation between the parties with respect to the Italian’s shareholding. Enel sued its partner for breach of contract in November 2008 due to Cel having blocked a $100 million investment, which would have meant that Enel would have gone from having just over 36% of the company's shares to nearly 53 %. After an arbitration process, lSO ruled in favour of the Italians, and CEL announced it would appeal against the decision.

This is the background to the current actions by the General Superintendency of Electricity and Telecommunications (Siget) who have now summoned LaGeo for failing to provide the power that it is committed to producing.

As outlined in an article by Daniel González Choto in Elfinancierocr.com, LaGeo "failed to generate 479 gigawatt hours (GWh) from 2007 to 2010, equivalent to a loss of $61.3 million if you take as a basis an average price of $128 per megawatt hour (MWh). "

"The Siget agreement also indicates that the LaGeo company has not demonstrated technical capacity nor diligence in the management and execution of the resources concessioned, and this could lead to a possible withdrawal of the concession."



More on this topic

New Geothermal Well in El Salvador

May 2013

LaGeo could exploit geothermal energy in a new well located in San Vicente, generating 30 to 40 megawatts.

The company LaGeo invested about $24 million in the exploration which led to the discovery of the new geothermal source.

As outlined in an article in Eleconomista.net, the Executive Hydroelectric Commission of the Lempa River (CEL), a partner in the LA GEO which belongs to the Italian company Enel, states that "a possible plant could generate more than $37 million in annual revenues for the company."

Dispute Over Geothermal La Geo Heats Up Again

March 2012

Two Salvadoran government agencies are insisting on not giving the majority shares in the La Geo generator to Italy's Enel, despite a court of international arbitration ruling against them.

Inversiones Energéticas (INE) and Comisión Ejecutiva Hidroeléctrica del Río Lempa (CEL) have again refused to give the Italian company Enel Green Power a majority stake in the geothermal company La Geo, despite a ruling by an international body against them.

The Indispensible Legal Certainty

October 2011

The Salvadoran Foundation for Economic and Social Development is concerned about SIGET's intervention in the conflict between Italy's Enel and Lageo.

A statement by FUSADES reads:

Legal certainty in public procurement: Necessary element for the investment climate

The legal environment, legal certainty, clear rules and independent institutions are elements that every investor evaluates to measure the business climate in a country and decide whether to invest in it.

El Salvador To Appeal LaGeo Ruling

July 2011

CEL has filed a motion to quash the ruling that would allow Enel to have a majority stake in LaGeo geothermal plant.

Tóchez Irving, president of the Commission of the Lempa River Hydroelectric Executive, said: "It is inappropriate to put a country’s strategic resource, such as a geothermal plant, into private hands," when presenting the proceedings before the court of appeals in Paris, France.

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