Despite the significant initial investment required for the exploration stage and the long project commissioning cycle, geothermal power is the source of renewable energy that most energy produces without interruptions for several decades with relatively low operating costs, which leads to an energy source with excellent long-term performance results. In Nicaragua, geothermal power provides attractive tax incentives based on Act 443, "Law on the Exploration and Exploitation of Geothermal Resources" and any amendments thereto, published on November 17, 2014.

Some of these tax incentives for the development of geothermal power in Nicaragua include the following:

  • Exoneration of customs duties and VAT on machinery, equipment, and materials for works construction.
  • Exoneration of the payment of income tax for a 10-year period following the commencement of the project's commercial operations.
  • Exoneration of payment of municipal income tax (IMI) for a 5-year period following commencement of the project's operations.

A key aspect to be noted is that ENEL (Empresa Nicaragüense de Electricidad), a state-owned company for power development, should own at least a 10% equity interest in the specific geothermal exploitation project and must have a seat at the Board of Directors with right to speak and vote in the company that was granted the exploitation concession. On the other hand, the remaining 90% equity interest must be owned by the specific domestic or foreign investor for up to a 30-year exploitation concession period following the execution of the exploitation agreement.

The geothermal exploitation concession may be extended by the Ministry of Energy and Mines (MEM) for a similar period to that initially granted –up to 30 years-, provided that the concessionaire has applied for an extension after five years following the commencement of the exploitation and/or at least three years before the expiration thereof, and to the extent there is technical evidence on the possibility to increase its generation capacity.

The fact that geothermal power flows 24 hours a day in a consistent and uninterrupted way is an attractive factor which favors its high profitability, along with the steady investment environment in Nicaragua over the last 5 years, which represents a positive global landscape for the commencement of geothermal energy development projects in the country.

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