Fly by Night Contracts for Electricity

Generally, if you're a Honduran government agency you await authorization before you sign a contract for a major purchase, and you follow government guidelines for how to negotiate such a contract; but not the Empresa Nacional de Energia Electrica (ENEE). They're special, apparently.

In the latest in what appears to be a series of contracts with US companies with no apparent expertise or established track record in the energy sector, Roberto Martinez Lozano, Director of ENEE, signed a contract on September 14 (contract 057-2011) with Ira L. Ginsburg of Westport Financial LLC for up to 100 megawatts of electricity from diesel or bunker oil fired generators, with a contract duration of 15 years.

Ira Ginsburg has extensive experience in putting together the financing for projects both in Latin America and other parts of the world. Some of these have been energy projects, including a 305 megawatt deal under the administration of Mel Zelaya. But all he does is line up financing. That's his expertise.

From his Linked-In profile we know he is a member of the Wartsila group on Linked-In. Wartsila, you might remember, is the Finnish energy company ENEE suggested it would be buying this generating capacity from. So one question is, why is the contract with Ira Ginsburg?

But while this is curious, it's not the most serious problem with this contract.

The contract was signed on September 14. Lozano wasn't approved to seek a contract for this power until September 28. He committed the government of Honduras to a contract for which he had no authority, with a financial company that has 3 employees and $96,000 in assets, not a company that has generation equipment or expertise.

There are several other problems with the contract, which should have conformed to the emergency decree passed on September 28.

First, the emergency decree only authorized the purchase of this power for 12 months. The contract Lozano signed obligates Honduras to buy it for 15 years!

The contract calls for installing an additional 24.7 megawatts capacity in Puerto Cortes, a region not covered by the emergency decree, in a plant which has been sold to another company for conversion to coal generation!

Still another problem is that the emergency decree calls for the government to pay 9.99 cents per kilowatt of installed capacity, while the contract calls for a payment to Westport Financial of 15 cents per kilowatt. Over its 15 year life, this no bid contract will cost the Honduran government $340 million.

There is an emerging pattern of questionable contracts here. ENEE also recently contract for an 18.5 megawatt solar power farm on Roatan with Onyx Service and Solutions, Inc., a company that until this August listed its chief business as running a network of banking ATM machines, and has never installed a solar power farm anywhere in the world.

All of this has come to light in the last few days because the contract was finally submitted to Congress for their authorization. In order for the contract to be in effect in Honduras, Congress must vote to authorize it. La Prensa reports there is fierce opposition to it in both the Liberal Party and National Party congressional delegations

It stinks of corruption or incompetence at the highest levels in ENEE.