SIEPAC Investment Program
The SIEPAC Investment Program energy project (the “project”) aims to finance the capital expenditures required for the investment plan associated with the following activities: (i) Construction of electricity transmission lines, as well as investments in substations and reactive energy (“planned regional works”); and (ii) reinforcement of the capacity of the national transmission lines required and approved by the respective national entities (“national reinforcements”). The total estimated cost of the project is up to US$370 million, which will be financed via an IDB Group “A” loan of up to US$200 million. The financial plan will be rounded out by the participation of a multilateral organization and by capital contributions.
The Central American Electrical Interconnection System [Sistema de Interconexión Eléctrica de los Países de América Central] (SIEPAC) consists of a 1,793 km long transmission line of 230 kV and 28 access bays in 15 substations across 6 countries: Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, and Panama. Phase one of the SIEPAC has already been installed and is up and running. The financing will be used for the construction of phase two, which will boost electrical transmission capacity through the SIEPAC.
The project is preliminarily being classified as a Category “A” project due to: (i) Its scope; (ii) consistency with the category assigned by the IDB after doing the due diligence for its financing of phase one, which is still under supervision; and (iii) the uncertainty surrounding the routing/impact of national transmission lines – national reinforcements.
In order to assess the main environmental and social risks associated with this project, it is necessary to separate the phases: (1) Construction of new substations, national transmission lines, and installation of the second circuit in the existing network; and (2) operation of the existing SIEPAC network.
For purposes of analyzing national reinforcements in terms of transmission lines, when determining how they are to be routed, impacts on populated areas and natural habitats must be taken into account, as must potential impacts on economic activities. This will require effective consultation processes and legal agreements with the owners of the affected lands and EPR already has a great deal of experience in managing such risks. Once the layouts have been determined, the risks inherent to the construction phase are environmental (solid and liquid waste management, potential fuel or lubricant spills, air emissions, noise, harm to the biological environment and biodiversity, erosion, and sedimentation); labor-related (risk of construction and road accidents, large load handling, work at height); social (increased traffic in areas nearby the construction, people being there temporarily, disruptions to traffic due to the movement of large loads over routes and roads, intrusive noises, reduced air quality); and cultural heritage-related (possible existence of archeological and/or paleontological remains). The risks inherent to the SIEPAC’s operation phase and to the associated transmission lines are mainly environmental in nature (harm to wildlife, mainly birds, due to the danger of collision with the lines, electrocution, and habitat loss). Labor-related risks are limited primarily to the handling of low voltage electrical equipment, work at height, and vehicular traffic.
Each one of the existing SIEPAC network’s national sections has its own environmental and social impact assessment (ESIA) and all the necessary environmental permits for operation. The planned works must be permitted in due course by national environmental entities and in accordance with the magnitude of their risks and impacts.
Due diligence will be carried out on two fronts: (1) Supervision of the existing SIEPAC operation by means of a review and monitoring of the accompanying matrix for environmental, social, and health and safety matters developed by the IDB. This review will also cover the gaps, recommendations, and plans of action brought up in previous missions to the SIEPAC and that remain pending; (2) a review will be done of EPR’s policies, systems, procedures, and process for managing risk and environmental, social, and health and safety impacts to manage new capacity expansion works (e.g., installation of a second circuit, construction of substations and new transmission lines nationally). Where possible, implementation of the contracting companies’ labor policies, extending to their subcontractors, providing services during construction will also be reviewed. Monitoring/analysis of relations with the communities will be requested in an effort to detect potential conflicts early, thereby enabling corrective actions to be taken to prevent them from worsening.
During the field visit, an attempt will be made to validate the preliminary classification assigned to the project.
The results of the due diligence will be laid out in the Environmental and Social Review Summary (ESRS). If gaps exist, the ESRS will include an Environmental and Social Action Plan (ESAP), for which the EPR will be responsible.
Gian Franco Carassale
+1 202 623-2957