Minerco Resources has obtained rights to the $140m, 30-year operations contract with the Honduran government for its Chiligatoro hydroelectric project.
The Chiligatoro project’s 30-year operations contract, granted by Secretaria de Recursos Naturales y Ambiente (SERNA), Honduras’ natural resources and environmental ministry, establishes an initial capacity of 5.2MWh for a term of 30 years.
The consideration for increased capacity can be obtained based on final plant design and SERNA approval. Minerco expects to receive increased capacity approval after submission of the final design.
The operations contract defines an initial capacity of 5.2MWh, which equates to 45,552MW per year, and a term of 30 years for a total of 1.37 million MW over the term of the agreement.
The contract also grants a ‘First Right of Refusal’ for renewal and allowances for all generation, sales and transmission of energy from the Chiligatoro project. Additionally, the ‘Transmission Clause’ provides Minerco with the ability to charge transmission fees from other operators through the Minerco owned transmission lines.
The contract requires approval on land purchases, environmental impact and local community approval. It then passes to the Honduran National Congress for ultimate approval. Once approved by Congress, the Chiligatoro operations contract becomes a recorded Honduran law.
Energy sales rates are defined by National Decree, based on season and peak hours and paid in US dollars for the life of the contract. Rates are based on the short term marginal cost, which is $97.96 per MWh for the year 2010 as published by SERNA.
For electricity generation projects utilizing renewable energy, Honduran Law has provided a 10% price incentive over the short-term marginal cost for a period of 15 years and a tax exemption for a period of 10 years.
The operations contract defines a sales rate of $107.76 per MWh (with incentive) for the first 15 years, or $73.6m. The following 15 years will utilize a rate of $97.96 per MWh, or $66.9m. Based on the quoted short term marginal costs and legislative incentives, the 30 year Chiligatoro operations contract is valued at $140.5m.