Los Mina Generating Station Repowering

distressed

Failure

The project involved repowering generating stations and increasing to 236-MW the existing 120-MW Los Mina plant. The power plant had been shut down for several years and before being suspended was producing only 22-MW. The initial project developer, Turbine Energy Inc. of Wadesville, negotiated the project with the government of Dominican Republic. In December 1995, a subsidiary of AES Corporation, Destec Energy Inc. assumed responsibility for financing the project in return for a 55% equity stake. Destec Energy Inc. later bought the remaining participation from Turbine Energy Inc. The total cost of the project was estimated at $80 million. As of December 2008, AES Corp. operataed the Los Mina plant through a wholly-owned project company, Dominican Power Partners. The power plant entered commercial operation in May 1996, and its two generators were converted from diesel to natural gas fuel in February 2003. The electricity was sold to electricitry distribution company Ede Este via a 15-year PPA, which was due to expire in July 2016. During 2004, the electricity sector in the Dominican Republic entered in a financial crisis. Although it was vulnerable for years, the 2004 economic downturn, financial crisis and an increase in fuel prices essentially caused the financial collapse of the sector. Specifically, the inability to pass through higher fuel prices and the costs of devaluation led to a gap between collections at the distribution companies and the amounts required to pay generators for electricity generated. By December 2004, the company indicated that there were no assurances that those issues would be resolved in its favor. Negotiations to overcome the crisis were taking placing including the IMF and the World Bank and the private electricity sector. The key issues to negotiate included (i) the failure to provide for full pass through of the costs of electricity supply to consumers; (ii) the failure of the regulator to follow through on subsidy commitments, which had put the distribution companies in the position of effectively financing portions of the subsidy programs; and (iii) the fiscal deficit of the government to reconstitute the sector. In October 2014, the IFC approved a loan of US$ 100 million to finance the expansion of the power plant generating capacity to 324 MW (A loan of up to US$50 million for its own account, a B loan of up to US$25 million and a syndicated loan of up to US$25 million from IFC acting in its capacity as implementing entity for the Managed Co-Lending Portfolio Program.). Around 84% of the installed capacity was agreed to be used to sell energy under a 6.5 year power purchase agreement with CDEEE (Corporación Dominicana de Empresas Eléctricas Estatales) starting in 2016.The total investment was estimated at US$ 260 million. In September 2015, the IFC decided to withdrawl from the project for technical reasons. The financing was then provided by a long-term loan from Citigroup (US$ 260 million). Also in September 2015, AES sold 8% of its shares in the project to local companies Estrella and Grupo Lindo.

Energy

World Bank Group

Project

Commercial, Natural Gas, Wind, Power Generation (CCGT), Government