Road to Recovery

What are the main consequences of the 40% energy losses that the country suffers from, and what actions are to be taken now?

To reduce energy losses is one of our fundamental objectives for the recovery of the sector. A decade ago, the level of losses was around 46%-48%. In 10 years, we have reduced that to 38%-40%. The slow progress can be justified by the inconsistency of investment. There are points at which progress could be made, but if the investment is stopped then the problem comes back. In the last two or three years, with the help of international organizations like the World Bank and the IDB, we have undertaken major projects that have resulted in significant loss reductions. The result of these projects may be seen in 1Q2013, and the impact on losses will be considerable.

How important is the change to the energy matrix for the Dominican Republic?

The generation costs are quite high, and this is one of the main obstacles for the solution of the problem. Approximately 45%-50% of our plants use fossil fuel generation. The current oil price makes generation costs too high for us. In the future, our focus will be primarily to change the facilities and direct them to gas and coal. We will try to move to the greatest extent away from energy derived from oil.

What is the main reason for the need to review contracts with power generators?

The contracts were designed in times when the price of fuel was very low, meaning the existing indexation formulas that have internal contracts are a distortion of the current price level. The formula allows for fuel indexing and a marginalization of those who are on contracts. These are the weaknesses of the contracts and they should be adjusted.

What is CDEEE’s estimate of the investment needed in power generation for the country?

Right now, we are proposing an open tender for a 900-MW coal-fired plant, and a gas-fired plant of 600 MW. This is an investment that can easily reach $3 billion. We will gradually introduce a 600-MW coal-fired plant, representing an investment of $1 billion-$1.2 billion.

What will be the model of contract for this project?

The idea is to make a turnkey project, meaning the government tenders the project and whoever wins will manage the funding, implementation, and additional facilities, such as constructing transmission lines, adapting the port, and installing coal storage facilities.

What projects will the government fund in the power sector?

Right now, there are loans that are being used to rehabilitate the networks that were granted by the IDB and World Bank. The government has no perspective on borrowing for investment in the sector. However, there was the need to make an investment in generation before the end of 2012. That was an internal operation where the energy sector and local banks worked together in order to make a substantial investment before the end of the year.

What investments are being made to exploit the hydroelectric potential of the country?

We have major hydroelectric projects under development, and we consider it an important factor in reducing costs, so we attach great importance to them. The current administration has made significant progress in the recovery of dams that were practically disabled. One of those units had gone eight years without operating, and these are the dams that will be rehabilitated. At this rate, the dams will provide an important contribution to our recovery.

What are the prospects for 2013?

We inherited a large domestic debt and a budget of $270 million. That assignment fell far short of the actual deficit in the sector. In 2013, there will be a bigger budget to cover the deficit, and that will help us to focus on solving the problem. The close of 2012 is going to be traditional; there will be nothing new. There are expectations of a substantial improvement in 2013, in compliance with the commitments we have with generators as well as with suppliers.