OREANDA-NEWS. December 16, 2015. The electricity sector in Honduras will improve its financial sustainability, efficiency and safety with a loan of \\$40 million approved by the Inter-American Development (IDB).

The operation will finance a program that will help the Honduran power sector also continues to operate with regime of efficient tariffs and subsidies in a competitive market and Honduras’active participation in the Central American Electricity Market.

The program will support the electricity reform initiated by Honduras in 2014, with the aim of strengthening the institutional capacity and sectoral regulatory framework; improving the financial sustainability and operational efficiency; and adopting policies oriented to ensure the security of electricity supply.

Specifically, the program will help to strengthen the financial sustainability and operational efficiency, generating reductions in the sector's contribution to the consolidated public sector deficit and the level of commercial losses.

Moreover, the reforms that are beingpromoted will stimulate the creation of incentives to increase the participation of renewable energies and will benefit the process of power integration in Central America through more competitive price levels for the regional system compared withthermal energy. Likewise, they will promote the harmonization of the regulatory framework for the tenderofregulations forpurchasing power in the system.

It is estimated that the program will produce to Honduras benefits associated with generation avoided by reducing losses; the generation avoided, given the response in reducing consumption by lower subsidy; financial income increased by reducing losses and subsidies; and an increase in the shareof renewable energies in energy production resulting in reduced cost of generation.

The IDB loan is a blend of 60 percent of Ordinary Capital to 30 years with a grace period of 5.5 years and a LIBOR-based interest rate, and 40 percent of the Fund for Special Operations to 40 years with a grace period of 40 years and/or 25 percent interest.

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The Inter-American Development Bank is devoted to improving lives. Established in 1959, the IDB is a leading source of long-term financing for economic, social and institutional development in Latin America and the Caribbean.The IDB also conducts cutting-edge research and provides policy advice, technical assistance and training to public and private sector clients throughout the region.