Honduras Bets on an Energy Reform to Stop a $600 Million Yearly Drain

Energy

A small Central American country is trying to fix a state power company that loses money faster than almost any other public body in the region, and the Honduras energy reform now before its Congress has drawn a striking show of support from Washington and the world’s big development lenders.

At the centre of the story sits the Empresa Nacional de Energía Eléctrica, or ENEE, the company that has produced, carried and sold electricity in Honduras since the late 1950s. For foreign readers, the simplest way to picture it is a single state firm doing everything in the power sector at once.

The problem is that it does all of it at a loss. The United States government, in its most recent investment review of the country, found that ENEE loses about US$50 million every month and carries debt worth more than a tenth of the whole economy.

That works out to roughly US$600 million a year, a figure the finance ministry and the company’s own managers now repeat openly. Honduran officials describe the utility plainly as a fiscal hole that swallows money meant for schools, clinics and roads.

President Nasry Asfura, who took office in January on a pro-business platform and enjoys warm ties with Washington, put it bluntly before a recent trip to Europe. He said the country is bleeding out through ENEE and cannot carry on this way.

What the Honduras energy reform actually changes

The bill running through the Congreso Nacional is short on paper but heavy in consequence. It is an 18-article decree that rewrites a dozen provisions of the country’s main electricity law, first passed in 2013.

Its core move is what officials call an escisión, a splitting of the single utility into separate businesses for generation, transmission and distribution under one state-owned parent. The idea is not new in the region, and it echoes a reform Honduras wrote into law more than a decade ago but never carried out.

The point of separating the three functions is to let private money flow into one part of the chain without selling the whole. The government argues that the power grid in particular needs investment the treasury simply cannot provide.

By one congressman’s account, financing transmission lines from ENEE’s own balance sheet would take about 15 years, while opening that piece to outside capital could deliver the upgrades in two or three. Lawmakers have cited a need for well over US$130 million in grid infrastructure alone.

Why the Honduras energy reform is not privatization, officials insist

The most heated argument is over ownership. The opposition Libre party, which governed until January, rejects the plan outright as a backdoor sale of a national asset.

The government’s answer is written into the text itself. One clause declares ENEE’s dams, reservoirs and power plants to be public property that cannot be seized, sold or transferred, and bars the parent company from handing over shares in any subsidiary without a vote in Congress.

The bill also protects the jobs, union membership and pension fund of ENEE’s workforce, a point the government stressed in talks with the utility’s powerful labour union. Officials frame the whole exercise as rescuing a public company rather than dismantling one.

For a London or Munich investor, the relevant signal is the unusual chorus of outside backers. The Inter-American Development Bank, the World Bank, the Latin American development bank CAF and the Central American integration bank have all endorsed the direction, and the International Monetary Fund has tied energy-sector reform to its lending programme with the country.

The United States added its voice in mid-June, with the State Department’s economic affairs office welcoming the push and framing it as a way to unlock American energy investment. That kind of alignment between a borrowing government and its creditors is rare, and it is what makes a utility overhaul in a country of 10 million people worth watching from abroad.

What this means for the months ahead

The reform cleared its early rounds of debate in Congress but then stalled. A final vote was expected in mid-June and did not happen, because the governing side could not lock down the support it wanted from the centrist Liberal party.

Approval needs only a simple majority of 65 votes in the single-chamber legislature, yet the government is chasing a broader coalition to give the change political durability. The president of Congress has signalled a fresh session by late June or early July to take it up again.

The stakes reach beyond the budget. Reliable, affordable power is the gating factor for the factories Honduras wants to attract, and the dry-season blackouts that hit every June and July are a standing warning of what happens when the grid is starved of money.

Frequently Asked Questions

What is the Honduras energy reform trying to fix?

It targets the chronic losses of the state utility ENEE, which bleeds roughly US$600 million a year and is the largest single drain on the national budget. The reform aims to restructure the company so it can attract investment and stop draining public funds.

Does the reform privatize ENEE?

The government says no, arguing the bill splits ENEE into separate units but keeps it state-owned, declares its core assets legally untouchable, and requires a vote in Congress before any subsidiary shares could change hands. The opposition disputes this and calls it disguised privatization.

Why do foreign governments and lenders care?

The United States, the World Bank, the Inter-American Development Bank, CAF and the BCIE see the overhaul as a path to a healthier energy sector that can draw private capital and support growth. The IMF has linked energy reform to its lending arrangement with Honduras.