Nicaraguan Energy Distribution Returns to State Ownership

January 14th, 2021

Chapter 4 of the book ‘The Violence of Development’ and this accompanying website covered the privatisation of the energy production and distribution markets in Nicaragua, and elsewhere in Central America. Given that this website allows for the updating of the issues covered in the book, news of the recent nationalisation of the energy distribution market in Nicaragua should certainly be included here.

The source for this news is the Nicaragua Network of the Alliance for Global Justice, which in turn took its information from Informe Pastrán on the 21st and 29th December 2020. Informe Pastrán serves as a regular daily mouthpiece for the Sandinista government of Nicaragua. Its information is often questioned by opposition figures and movements and by the two major daily newspapers in Nicaragua whose own information is frequently even more like unbelievable baseless propaganda than that of the government.

Key words: Privatisation; nationalisation; electricity distribution; electricity coverage; climate change; liquefied natural gas (LNG).


Nationalisation of energy distribution in Nicaragua

On Dec. 21 [2020] the Nicaraguan National Assembly approved the “Law of Sovereign Assurance and Guarantee of the Supply of Electrical Energy to the Nicaraguan Population,” through which electricity distribution is once again in the hands of the State, ending the privatization of this strategic area that was carried out under the government of Arnoldo Aleman [1997 – 2002]. The distributor companies DISNORTE and DISSUR, created in 1999 with the objective of distributing and commercializing electrical energy, received this right of exploitation for 30 years. But, with this law, electricity distribution is now again in the hands of the State, including all the shares owned by TMI S.A. in DISNORTE and DISSUR thus guaranteeing coverage and quality. It is established that “by virtue of this law, … in order to guarantee the continuity of the electric energy service to the Nicaraguan population, the companies DISNORTE and DISSUR will be operated and administered by the institution(s) and/or companies that the State, through that the Ministry of Energy and Mines authorizes or delegates for such purpose.”

When the distribution was privatized several state-owned generators were sold to private corporations at a cheap price. The companies didn’t invest in the sector, and this led to the collapse of the system under President Enrique Bolaños with regular electricity blackouts of 8 to 12 hours a day. At the time, distribution was in the hands of the Spanish company Union Fenosa. The electricity cuts were overcome with the return to government of the FSLN in 2007 and the emergency installation of a 60 MW diesel-based generation plant facilitated by the president of Venezuela, Hugo Chávez. Union Fenosa decided to sell its shares to the Spanish company Gas Natural, which in turn sold to TMI S.A..

Good News for Electricity Sector in 2020 and for 2021

Beginning January 1, 2021, families will benefit from a 12.5% average reduction in electricity rates. The government achieved 98.5% electricity coverage nationwide in 2020; energy was brought to 12,223 new homes and the supply was improved in 6,049 homes, which entailed an investment of US$27.7 million. In public lighting, the goal was surpassed, with 30,046 street lights installed nationwide. This month the Central American Bank for Economic Integration approved US$143 million to strengthen the electricity sector to help achieve the goal of 99. 9% national coverage. Projects will be carried out in the period 2022-2025 to meet that target. US$87 million will be allocated to electrification, which translates into 35,000 illuminated households for which more than 2,000 km of distribution networks will be built.


US Energy Company and Nicaragua Sign Deal

The US company New Fortress Energy Inc. announced Dec. 21 that it has signed two long-term liquefied natural gas supply agreements to support its natural gas and electricity businesses in Puerto Rico, Mexico and Nicaragua. “As a company, our goal is to match our LNG purchases as closely as possible to our customers’ volumes, thereby reducing our exposure to changes in the market price of LNG in our portfolio,” said New Fortress President and CEO Wes Edens.

Informe Pastrán noted that Nicaragua could become the new rising star of natural gas in Latin America with the signing of a power purchase agreement between the Nicaraguan energy company and the US company and with the beginning of activities for the construction of a natural gas based plant, which will be located in Puerto Sandino. The plant will be connected to the national grid through the Sandino Substation and its annual contribution will be 2,233 GWh-year. [Note: This power will support Nicaragua’s wind and other renewable energy sources which now provide over 70% of the country’s energy.]


Note by Martin Mowforth:

The achievements in the broadening of electricity distribution by the Nicaraguan government since 2007 have been impressive. Similarly, its re-composition of the country’s electrical energy base from one based almost exclusively on fossil fuels to one that is now largely based on the recyclables of wind, solar and geothermal has also been effective, appropriate and economically and environmentally justifiable. Natural gas, however, is a contributor to global warming and should not be seen as part of the country’s drive towards sustainable energy sources. The growth in LNG is incompatible with efforts to address the climate crisis and Nicaragua’s role as “the new rising star of natural gas in Latin America” may not be compatible with its drive towards sustainable energy production and distribution