IFC, a member of the World Bank Group, and Oesterreichische Entwicklungsbank AG (OeEB) are providing US-Dollar 98 million in financing for Compañía Hondureña de Energía Renovable S.A. (COHERSA), to construct the largest private hydropower project in Honduras, which will promote clean energy and help the country meet its growing power needs.
IFC is supporting the construction of the 38.5-megawatt project with senior and subordinated loans totaling US-Dollar 30 million. IFC has also mobilised US-Dollar 68 million for the project, including a US-Dollar 23 million parallel loan from OeEB, Austria's development bank.
The project, La Vegona, is IFC's first renewable energy investment in Honduras. Beginning in mid-2013, the hydropower plant is expected to produce about 181 gigawatt hours of electricity a year and will power thousands of households in the country. La Vegona will also help to improve the competitiveness and sustainability of Honduran exporters by supplying lower-cost energy from a clean source. During the construction phase, the project is expected to employ about 500 local workers.
Adolfo Larach, President of COHERSA, the project's developer, said: "La Vegona represents an important milestone for the development of renewable energy in Honduras. The project will make a significant contribution to help reduce Honduras' dependence on imported oil, by providing a reliable source of low cost, clean energy."
More than 60 percent of Honduras' power is generated from fossil fuels, which are expensive and pollute the environment. To help address this challenge, IFC is working to support the government of Honduras' strategy to develop its domestic renewable energy resources, including hydropower.
"Promoting renewable-energy projects is at the core of IFC's climate change strategy in Latin America and the Caribbean," said Bernie Sheahan, IFC's Director for Infrastructure in Africa and Latin America and the Caribbean. "La Vegona will have a positive impact on the environment by offsetting carbon emissions of fossil-fuel power projects, while providing long-term renewable energy at affordable prices to Honduras."
Andrea Hagmann, a member of OeEB executive board, said: "Sustainable energy is important for development and growth. Using renewable energy decreases the dependency on expensive fossil energy, a burden for the economies of developing countries."
This financing is consistent with IFC's strategy in Honduras to support private sector companies that have a strong development impact, particularly in strategic sectors such as infrastructure and renewable energy and helping local companies become regional and global players.
IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector. We help developing countries achieve sustainable growth by financing investment, providing advisory services to businesses and governments, and mobilising capital in the international financial markets. In fiscal 2011, amid economic uncertainty across the globe, we helped our clients create jobs, strengthen environmental performance, and contribute to their local communities - all while driving our investments to an all-time high of nearly US-Dollar 19 billion.
Oesterreichische Entwicklungsbank AG (OeEB) has been operating as the official Development Bank of Austria since March 2008. It specialises in the provision of long-term finance for the implementation of private sector projects in developing countries which create sustainable development. Additionally, OeEB provides Technical Assistance (Advisory Programmes) which can be used to enhance the developmental impact of projects.
COHERSA is a special-purpose vehicle created for the development of the La Vegona project. It is a joint venture between IRESA (Inversiones y Representaciones Electromecánicas S.A.) and the Finnish Fund for Economic Development "Finnfund". IRESA is an affiliate of the Larach group of companies, which have been present in Honduras since the early 1900s. The Larach group of affiliated companies owns and operates over 128 megawatts of generation capacity in Honduras with a further 50 megawatts of hydropower projects under construction (including La Vegona) and another 190 megawatts under early-stage development.