Proposed Tax On Geothermal Exploitation

The Congress of El Salvador is evaluating implementing a tax which would in principle would apply only to LaGeo, a subsidiary of the Italian company Enel.

Friday, March 8, 2013

Against the backdrop of the dispute between the Government and the Italian company Enel over the capitalization of the geothermal LaGeo, " ad-hoc committee of the Legislature which is studying the LaGeo concession, the only cmpany with state permission to exploit subterranean heat sources, has proposed a series of amendments to the Electricity Law, including a tax that would be incurred by the activity of the geothermal company. "

According to an article in Laprensagrá, Roberto Lorenzana, a FMLN deputy, said that ​​the reform proposal to determine a tribute on companies engaged in power generation based subsurface vapor has already been made ."Everywhere a price is put on the commodity that is steam," he added.

"In principle we could support that (the tax on underground exploitation), as long as the rate set for the exploitation of the subsoil is competitive", said the deputy from Arena Edwin Zamora .

According to Douglas Aviles from the Democratic Change party, it would not be in Congress's jurisdiction to establish the tax but should rather be imposed by the Superintendency of Electricity and Telecommunications (SIGET) .

¿Busca soluciones de inteligencia comercial para su empresa?

More on this topic

El Salvador Nationalizes Geothermal Station LaGeo

December 2014

The Italian company Enel Green Power will be selling its stake in the geothermal electricity station LaGeo, which could end to the dispute between the company and the Salvadoran government.

As outlined in an article on, a transfer of the 36.2% stake belonging to Enel has been valued at $280 million, payable via a trust based on the future flows from LaGeo, an instrument which must be operational before December 15th, 2014. This trust will be later extended to $480 million, a figure that casts doubts on the total price of the Enel shares.

Lawsuit Against El Salvador for Investment in LAGEO

August 2013

The Italian consortium Enel has filed a case against the Salvadoran State with the ICSID over a dispute on equity interest in the geothermal plant.

The case was filed with the International Centre for Settlement of Investment Disputes (ICSID).

The lawsuit, according to the company, is due to the government trying to be more involved in LaGeo, and also because they believe they have been denied their legitimate rights.

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, 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."

LaGeo Could Lose Concession in El Salvador

October 2011

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.

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.