Member Article

As we all know water is a fundamental element for life and for all ecosystems. It is also an economic resource that contributes to satisfy human necessities as fishing, agriculture, industry, transport, leisure and, not less important, hydroelectric energy generation. In Industry, water is fundamental in numerous processes and applications and, in that sense, hydroelectric use is of extraordinary importance. In addition, although in general energy can not be stored, the importance of hydroelectric energy also releases in that it is a way to store energy since water, which produces electricity, can be stored. The generation of hydroelectric energy offers numerous advantages, such as low costs; no pollution, since water is a renewable resource; and it almost instantaneously provides the necessary energy in case of a power station failure. As a result of these above mentioned multiple advantages of hydroelectric generation, many countries have decided to create the necessary conditions to produce hydroelectric energy and Nicaragua has not been an exception. Since 2002, in our country, political strategies and regulations have been promoted to facilitate and motivate the development of Hydroelectric Projects. These means provide incentives to motivate private investment. In September 2003 the Hydroelectric Subsector Promotion Law (Law 467) came into force. Its objective is to promote the generation of energy using hydraulic sources, within a frame of sustainable use of hydro resources focused on the social and economic development of the Nation. Taking into consideration human water necessities as top priority, regardless of its use for the generation of hydroelectric energy, population can continue using the water sources for their common activities. According to Law 467, in order to develop any project related to the use of water for hydroelectric generation a license is needed, which is only valid for the generation of hydraulic energy between one and five megawatts. The Ministry of Industry, Development and Commerce (MIFIC) is the institution that grants these licenses to any natural or artificial, public or private persons that may request for it. This Law and its Bylaw establish the requirements and the necessary procedure for obtaining the licenses. This license has a maximum duration of 30 years and it is independent of the Licenses of Generation of Electrical Energy granted by the Nicaraguan Institute of Energy (INE), that need to be previously requested. By means of this Law some of the established incentives are the exoneration of the payment of the following taxes: Import Duties (DAI), VAT (IVA), Income Tax (IR), Local taxes, and Fiscal Stamps Taxes. The aforementioned are only applicable in case of new projects which main use of the water resource is hydroelectric generation . Law 467 opens a door and becomes a very important tool for any natural or artificial, Nicaraguan or foreign person interested in investing in energy generation using water, within the framework of this Law.