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Islandia – Nicaragua“Geothermal Capacity Building Proyect”

Final Proyect Document

MINISTERIODE ENERGIAY MINAS

ICELANDIC INTERNATIONAL DEVELOPMENT AGENCYÞRÓUNARSAMVINNUSTOFNUN ÍSLANDS

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Islandia - Nicaragua • “Geothermal Capacity Building Project”

Project Brief:

Project title: Iceland – Nicaragua: Geothermal Capacity Building Project (GCBP)

Donor agency: Icelandic International Development Agency, Iceland

National counterpart: Ministry of Energy and Mines

Location: Managua and León Geothermal zones in Nicaragua Provinces of León and Chinandega Momotombo – Momotombito, El Hoyo – Monte Galán Managua – Chiltepe, Telica, Santa Clara, El Chonco

Implementation period: 2008 to 2012 (five years)

Financed by: Republic of Iceland

Amount: US$ 4,2�1, 515.8


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Acronyms

CDM Clean Development MechanismEIA Environmental Impact AssessmentENEL National Electricity CompanyGGE Greenhouse Gas EffectsICEIDA Icelandic International Development AgencyISOR Icelandic Institute for Geoscientific StudiesMARENA Ministry of the Environment and Natural Resources ONDL National Clean Development OfficePID Project Identification Document ToR Terms of Reference UCA Central American UniversityUGA-MEM Environmental Management Unit – Ministry of Energy and Mine UNAN-Managua National Autonomous University Managua campus UNAN León National Autonomous University León campusUNI National Engineering University

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Índice

Introduction .................................................................................................................................... 9

i. Executive Summary ............................................................................................................. 11a. Overall objective ............................................................................................................... 11b. Expected outputs .............................................................................................................. 11c. Economic benefits ............................................................................................................ 12d. Social and cultural benefits ............................................................................................... 12e. Non-quantifiable effects .................................................................................................... 12f. Main project activities. ...................................................................................................... 1�g. Timetable .......................................................................................................................... 14h. Development milestones .................................................................................................. 14i. Main risk factors ................................................................................................................ 14j. Budget .............................................................................................................................. 16

I. General overview of Nicaragua........................................................................................... 171.1 Geography and population ............................................................................................... 181.2 Politics .............................................................................................................................. 181.� Economy ........................................................................................................................... 181.4 Description of energy sector ............................................................................................. 19

II. Background and Rationale .................................................................................................. 252.1 Background....................................................................................................................... 252.2 Rationale........................................................................................................................... 26

III. Overall objective, components, activities and outputs .................................................... 33�.1 Overall objective ............................................................................................................... ��.2 Components ..................................................................................................................... ��

�.2.1 Component 1 ......................................................................................................... ��.2.2 Component 2 ......................................................................................................... ��.2.� Component � ......................................................................................................... ��

�.� Expected outputs .............................................................................................................. ��.�.1 Outputs component 1............................................................................................. ��.�.2 Outputs component 2............................................................................................. �4�.�.� Outputs component �............................................................................................. �4

�.4 Main project activities ....................................................................................................... �4�.4.1 Activities for Output 1, component 1 ..................................................................... �4�.4.2 Activities for Output 2, component 1 ...................................................................... �5�.4.� Activities for Output �, component 1 ...................................................................... �5�.4.4 Activities for Output 4, component 1 ..................................................................... �6�.4.5 Activities for Output 1, component 2 ...................................................................... �6


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�.4.6 Activities for Output 2, component 2 ..................................................................... �6�.4.7 Activities for Output 1, component � ...................................................................... �6�.4.8 Activities for Output 2, component � ..................................................................... �7

IV. Project milestones ............................................................................................................... 39

V. Monitoring and evaluation .................................................................................................. 40

VI. Risk factors........................................................................................................................... 416.1 External factors ................................................................................................................. 416.2 Internal risks ..................................................................................................................... 42

VII. Project timing .................................................................................................................. 44VIII. Project timetable ............................................................................................................. 46IX. Budget ............................................................................................................................. 47X. Project strategy............................................................................................................... 50XI. Implementation strategy ................................................................................................ 52

11.1 Project design ........................................................................................................ 5211.2 Implementation ...................................................................................................... 5211.� Development strategy ............................................................................................ 5211.4 Project management .............................................................................................. 5�11.5 Project Steering Committee responsibilities. ......................................................... 5411.6 Project Coordinating Committee functions............................................................. 5511.7 Level of implementation ......................................................................................... 5511.8 Monitoring and evaluation reports.......................................................................... 5511.9 Procurement of material assets, equipment and services ..................................... 56

XII. Components .................................................................................................................... 5712.1 Component 1. Technical Assistance ...................................................................... 57

12.1.1 Scope of the Technical Assistance Component ........................................ 5712.1.2 Background and rationale ......................................................................... 5712.1.� Objectives ................................................................................................. 5812.1.4 Beneficiaries .............................................................................................. 5812.1.5 Outputs and activities ................................................................................ 58

a. Output 1: ............................................................................................. 58b. Activities R1 ........................................................................................ 59c. Output 2: ............................................................................................. 59d. Actividades R2 .................................................................................... 60e. Output �: ............................................................................................. 60f. Activities R� ........................................................................................ 60g. Output 4: ............................................................................................. 60h. Actividades R4 .................................................................................... 60

12.1.6 Inputs .......................................................................................................... 61a. Work (what will be done) ..................................................................... 61b. Training ............................................................................................... 61c. Staff ..................................................................................................... 62d. Timetable ............................................................................................ 62

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12.1.7 Technical assistance component indicators ................................................ 6212.1.8. Monitoring and Evaluation ........................................................................ 6412.1.9 Work Plan ................................................................................................... 6412.1.10 Progress reports ....................................................................................... 6512.1.11 Factors influencing the project .................................................................. 6512.1.12 Budget....................................................................................................... 66

12.2 Component 2. Training........................................................................................... 6612.2.1 Scope of the training component .............................................................. 6612.2.2 Background and rationale .......................................................................... 6712.2.� Objetive ....................................................................................................... 6712.2.4 Beneficiaries ............................................................................................... 6712.2.5 Outputs and activities.................................................................................. 68

a. Output 1 .............................................................................................. 68b. Activity R1 ........................................................................................... 68c. Output 2 .............................................................................................. 68d. Activity R2 ........................................................................................... 68

12.2.6 Inputs .......................................................................................................... 68a. Work (what will be done) ..................................................................... 68b. Training ............................................................................................... 69c. Staff ..................................................................................................... 69d. Timetable ............................................................................................ 69

12.2.7 Training component indicators .................................................................. 6912.2.8 Monitoring, follow-up and evaluation ........................................................ 7012.2.9 Work plan .................................................................................................. 7012.2.10 Progress reports ....................................................................................... 7012.2.11 Factors influencing the project .................................................................. 7112.2.12 Budget....................................................................................................... 72

12.� Component �. Endowment of technical resources, infrastructure and equipment ................................................................................. 72

12.�.1 Scope of the component for endowment with technical resources, infrastructure and equipment ............................ 7212.�.2 Background and rationale ........................................................................... 7212.�.� Objetive ....................................................................................................... 7�12.3.4 Beneficiaries ............................................................................................... 7�12.�.5 Outputs and activities.................................................................................. 7�

a. Output 1 .............................................................................................. 7�b. Activities R1 ........................................................................................ 7�c. Output 2 .............................................................................................. 7�d. Activities R2 ........................................................................................ 7�

12.�.6 Inputs .......................................................................................................... 74a. Work (what will be done) ..................................................................... 74b. Training ............................................................................................... 74c. Staff ..................................................................................................... 74d. Timetable ............................................................................................ 74


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12.�.7 Indicators for the component for endowment with technical resources, infrastructure and equipment. ......................... 7412.�.8 Monitoring, follow-up and evaluation ......................................................... 7512.�.9 Work plan .................................................................................................... 7512.�.10Progress reports ........................................................................................ 7512.3.11 Factors influencing the project .................................................................. 7512.�.12 Budget....................................................................................................... 76

Appendices

‹ 1. Logical Framework ............................................................................................................. 77

‹ 2. Budget .............................................................................................................................. 107

‹ �. Five year plan of operations ............................................................................................. 11�

- Technical Assistance ...................................................................................................... 115

- Training .......................................................................................................................... 121

- Infraestructure and equipment ....................................................................................... 127

- Administration and Evaluations...................................................................................... 1�1

‹ ICEIDA’s Policy and Plan of Operations .............................................................................. 1�5

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introduction

The project titled “Iceland -- Nicaragua: Geothermal Capacity Building Project” has its genesis in a proposal put forth by the Government of Nicaragua to the Government of Iceland, through the Ministry of Energy and Mines (MEM), as the main counterpart, and the Ministry of the Environment and Natural Resources (MARENA). The project is to be financed by the Icelandic Agency for International Development (ICEIDA).

The first request for assistance to the development of an institutional support project for the geothermal subsector was made by the Government of Nicaragua to the Government of Iceland in 2004. At that point the process of identifying the situation and the problems existing in Nicaragua began, both in the energy sector generally, and in the geothermal subsector in particular.

In 2006 a workshop titled “Future of Geothermal Energy in Nicaragua and Icelandic Cooperation” took place. The workshop’s main goal was to promote the exchange of experience on geothermal issues between the two countries. Thus Nicaraguan specialists learned of and became familiarised with the experience and capacity developed by Iceland in the energy sector, while Icelandic experts gathered information on Nicaragua’s real needs in the energy sector, and specifically in the geothermal subsector.

The workshop’s main output was the Project Identification Document (PID), which sets forth the basic guidelines for the planning of a Nicaragua Geothermal Project with Icelandic support. The main emphasis was placed on capacity building for the development of geothermal energy. Icelandic and Nicaraguan authorities approved the Project Identification Document.

In early 2007, after the new Nicaraguan government took office, the Icelandic International Development Agency (ICEIDA) took up the process of preparing and drafting the final project document, in which Nicaraguan needs are clearly identified. This was done jointly by experts from Iceland GeoSurvey (ISOR) and authorities from the Nicaraguan Ministry of Energy and Mines (MEM) and the Ministry of the Environment and Natural Resources (MARENA).

The project consists of three components: short and medium-term technical assistance; instruction and training; and endowment with equipment.

These three components are closely linked to the overall project objective, which is to “enhance the utilization of geothermal resources in Nicaragua.”


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This document describes the project titled “Iceland -- Nicaragua: Geothermal Capacity Building Project”, prepared by the ICEIDA office in Nicaragua, ISOR experts, technicians from the two Nicaraguan ministries involved (MEM and MARENA), and a Nicaraguan consultant.

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i. executive summAry

a. Overall objective

The overall objective put forth in the project is as follows:

“To enhance the utilization of geothermal resources in Nicaragua.”

Underlying this overall objective is a recognition of the important role to be played by government institutions in the promotion, development and supervision of the country’s geothermal resources.

Taking this recognition for its starting point, the project is geared toward creating and strengthening the necessary national capacities, so that government institutions involved in geothermal work are in a position to comply with their responsibilities and facilitate the sustainable development in Nicaragua of existing geothermal resources in the medium and short term.

b. Expected output

The project considers three types of outputs, each reflecting the areas of attention to be developed.

The main output expected is to improve and increase the level of knowledge and capacity at government institutions as concerns coordinating, supervising, monitoring and developing the exploration and exploitation of geothermal resources in Nicaragua, by means of short and long-term technical assistance. This will allow for creating capacity at MEM for monitoring, follow-up and evaluation of the management and development of geothermal production in Nicaragua. Likewise, MARENA and the UGA-MEM are to be strengthened in their capacity to monitor and evaluate Environmental Impact Studies (EIA) regarding the inclusion of the sustainable use of geothermal resources in protected area management plans; the strengthening of the National Clean Development Office (ONDL); and the enforcement of Clean Development Mechanisms (CDM) at geothermal projects.

As a complement to the main output described immediately above, the project intends to strengthen technical capacities among civil servants in the public sector as regards the supervision, monitoring and environmental oversight of geothermal development projects in Nicaragua, through formal and non-formal training on the subject.


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A third output is geared toward strengthening and equipping the MEM Investigation Unit, so it can satisfy the demand for geochemical services and geothermal investigations in Nicaragua.

c. Economic benefits

The project will bring economic benefits to the people of Nicaragua in the form of better living conditions by propitiating an improvement in the overall functioning of the economy. If the government has more capacity to manage the geothermal sector, this will lead to a more efficient coordination of the national energy sector, which in turn will allow for covering the population’s energy demand. That outcome a dynamic energy supply - will ensure that people are able to go about their economic and social activities unhampered by shortages.

d. Social and cultural benefits

The project will contribute to social stability insofar as it will help to reduce the economic and social tension created by an inefficient energy service, opening spaces for improving citizen security and coexistence in the neighbourhoods.

At the same time it will contribute to strengthen national capacity for protecting the environment and natural resources by ensuring that geothermal production be sustainable and friendly with its physical and social setting. This will promote a better quality of life, which will promote a better quality of life among people living in zones in which geothermal projects are being developed.

e. Non-quantifiable effects

The project will have effects that are noticeable but difficult to quantify.

Among these are an increase in knowledge and capacities and the know-how to carry out monitoring and supervision activities at geothermal projects, both from a technical and geothermal standpoint. Likewise, the project will create the national conditions and capacities at government institutions for identifying, mapping and investigating geothermal potential at both high and low levels of enthalpy, as well as identifying possible uses for industry and services.

The project will have a direct influence upon all aspects, by increasing and improving their quality. This, however, can only be measured (quantified) in the long term, by means of indicators such as energy production, increases in the generation of electricity from geothermal resources, proper and timely compliance by public, private or mixed capital concessionaires in their activities, greater technical capacity at government institutions, and the onset of industrial uses or the direct use of low enthalpy geothermal resources. The latter in particular represent clear and positive economic and financial factors for the development of those areas at which these resources are to be found.

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f. Main project activities.

The project’s most significant activities are as follows:

The evaluation of possibilities for the expansion of steam generation in the Momotombo geothermal field; of the results of the geoscientific research carried out by GeoNica in its concession area and subsequent expansion plans; and of management at the San Jacinto reservoir and the current expansion of power production in the area.

The drawing up of regulations and tendering processes for geothermal concessions, the creation of the Investigation Unit at MEM, and the identification of the industrial potential in low enthalpy geothermal areas.

A review of ToRs for Environmental Impact Assessments and their scope, the EIA methodology being used, environmental audits and steps for carrying out EIAs for geothermal production projects.

The preparation of mandatory technical regulations on geothermal projects and environmental regulations for the development of geothermal resources in its various phases.

The identification of protected areas with potential and feasibility for geothermal development and the protection of natural values in protected areas with geothermal potential.

The strengthening of the institutional framework at the National Clean Development Office (ONDL) for the purpose of enforcing the Clean Development Mechanism in geothermal projects, and the preparation of a methodology for the sale of carbon dioxide emission reduction certificates upon establishment of geothermal projects.

Training at different levels of specialisation: post-graduate, master’s programmes, technical courses, seminars, workshops and meetings, specific courses, exchanges of experience and memberships in international organisations that work on issues related to geothermal energy production.

The definition of the structure and framework for the functioning of the Investigation Unit at MEM and its endowment with work instruments and complementary equipment, as well as the specialised human resources for its functioning.


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g. Timetable

The project was designed and drawn up during the year 2007, including technical advisory services provided by Iceland upon request from government institutions.

The project is planned over a five-year period (2008 – 2012) and has been divided into three phases:

Phase 1: Implementation Phase, starting up in 2008.

Phase 2: External evaluation and mid-term planning (second quarter 2009).

Phase �: Project conclusion (2012): termination of each of the project components, final evaluation and overall evaluation of the entire project.

h. Development milestones

Five milestones have been identified that carry implicit important changes in conditions prevailing before the project and that will qualitatively leave their mark on both MEM and MARENA vis-à-vis their responsibilities in the area of geothermal production, taking into account their respective responsibilities. The mile stones are:

i. Specialised technical assistance in the field of geothermal activities will allow for creating capacities to coordinate, supervise, monitor and develop the exploration and exploitation of geothermal resources in Nicaragua.

ii. The establishment of the Investigation Unit at MEM.

iii. The certification and validation of the geochemical laboratory.

iv. The creation of capacities to manage the EIA processes for geothermal plants, as well as the geothermal production in protected areas.

v. The development of capacity to use the Clean Development Mechanism for the sale of carbon dioxide emission reduction certificates upon establishment of geothermal projects.

i. Main risk factors

The risks that threaten any given project have more to do with the real context in which it is carried out than the intentions of those implementing it. Risks may emerge or be caused externally, but can also be internal to the project’s development, regardless of the good will underlying its conception. Thus risks must be taken into account and ways found to prevent, avoid, modify or mitigate them

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whenever possible, in order that they not undermine the project’s progress.

The risks must be carefully identified for each project component. In general terms, the main risk factors identified for the project are as follows:

• That the actions necessary to favour the promotion and development of geothermal resources are not taken, thus generating an unfavourable political climate.

• Lack of clarity and definition on the part of the government regarding the role of private enterprise and already existing concessionaires in the development of geothermal resources.

• Lack of incentives that stimulate participation in the pre-investment phase as concerns the exploration and exploitation of high enthalpy sources, as well as making use of low enthalpy resources.

• The non-existence of a regulatory framework that transparently defines both public and private responsibilities for investment in geothermal projects.

• Failure to include geothermal development in the energy plans from a sustainable development perspective.

• Private investors developing geothermal projects do not comply with the contracts.

• Insufficient human resources participate in geothermal development activities.

• MEM fails to allocate sufficient resources for the establishment and sustainability of the Investigation Unit on geothermal resources.

• Lack of coordination between those managing geothermal resources and the academic institutions in the country.

• Absence of (or insufficient) initiatives at MEM to promote projects intended to make comprehensive use of geothermal resources.

• Difficulty on the part of Icelandic experts to comply with their training commitments due to excessive work loads.

• Poor operational planning makes it difficult to coordinate between the needs of the project and the implementation of planned activities and tasks.


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j. Budget

The total estimated budget in United States dollars (USD) is detailed in the table below.

Table 1. Annual Buget in US$

Components 2008 2009 2010 2011 2012 Grand Total

Technical assistance

692,675.0

594,020.0

362,025.0

345,880.0

288.820.0 2,282,820.0

Other technical assistance

37,000.0

34,000.0

71,000.0

Training

151,274.0

209,234.0

206,941.0

163,589.0 35,907.0 766,945.0

Infrastructure, equipment

183,906.0

73,406.0

2,000.0

2,000.0

2,000.0 263,312.0

Administration 94,160.0

98,516.0

98,307.6

103,578.3

109,376.2 503,938.0

Evaluation

12,000.0

50,000.00

80,000.0 142,000.0

Subtotal

1,171,015.0

1,059,176.0

669,273.6

616,547.3

517,003.2 4,030,015.0

Contingencies 5 %

58,550.75

52,958.8

33,463.7

30,752.4

25,775.2.2 201,500.8

Grand Total

1,229,565.8

1,112,134.8

702,737.2

647,799.7

541,278.3 4,231,515.8

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i. GenerAl overview of nicArAGuA

1.1 Geography and population

Nicaragua is located at the centre of the Central American isthmus. It borders to the north with Honduras, to the south with Costa Rica, to the east with the Caribbean Sea and to the west with the Pacific Ocean. It has a coastline of 352 km on the Pacific side and 541 km on the Caribbean coast. There are two large lakes that together occupy 10,0�� km2.

Nicaragua has a landmass of 1�0,�75.5 km2, making it the largest country in Central America. According to the 2005 Population and Housing Census the Nicaraguan population is of 5,142,098 inhabitants. Population density stands at 42.7 persons per square kilometre.

Nicaragua is divided into three large geographic areas: the Pacific, the Atlantic and the Central regions.

The Pacific region, with 14.�% of the territory has 54% of the country’s population. It is essentially flatland, separated from the remainder of the country by a volcanic mountain range with several active volcanoes located in parallel fashion to the Pacific coastline, from the Gulf of Fonseca to the north to Lake Cocibolca to the south.

RegiónAutónoma delAtlantico Norte

RegiónAutónoma delAtlantico Norte

RegiónAutonóma delAtlantico Sur

RegiónAutonóma delAtlantico Sur

Jinotega

MatagalpaMatagalpa

Boaco

ChontalesChontales

Rio San JuanRio San Juan

GranadaGranada

LagoCocibolcaLagoCocibolca

CarazoCarazo

RivasRivas

ChinandegaChinandega

Nueva SegoviaNueva Segovia

MadrizMadriz

EstelíEstelí

LeónLeón

MasayaMasayaManaguaManagua

Jinotega

Golfo deFonseca

OcéanoPacífico

Honduras

Costa Rica

OcéanoAtlántico


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For its part, the Atlantic region covers 5�.1% of the territory, but contains only 14% of the population. This area combines pine savannah, broad-leaf tropical forests, wetlands, and is crossed by the country’s largest rivers.

The Central Region is located between the Pacific and Atlantic regions, occupying 32.5% of the territory and containing �2% of the population. It is the part of the country with the most intensive agricultural activity.

Nicaragua is divided into 15 provinces (or departments), two autonomous regions and 15� townships (or municipalities). The latter form the basic political-administrative unit.

1.2 Politics

Nicaragua concluded the twentieth century as an important actor in the peace process signed by the Central American presidents in 1987. Armed conflict, revolutions and political violence have characterised the last 150 years of its history. However, as the past century came to a close, Nicaragua was giving evidence of having overcome the main causes of its previously chronic instability.

In the years 1984, 1990, 2001 and 2006 elections were held that complied with international standards, and presidents, legislators and local authorities were elected in a free and transparent manner. The rule of law and democratic institutionality are still young in Nicaragua, and therefore subject to the processes of modernising the country’s political institutions.

1.3 Economy

The World Bank has declared Nicaragua a “low income developing country”, while the International Monetary Fund (IMF) considers it “a poor, highly indebted country”.

Through macroeconomic stabilisation and structural reform programmes, deregulation and the opening up of markets, Nicaragua has moved from being a centralised economy in the Eighties to becoming a market economy in the Nineties. However, there persist significant gaps in several macroeconomic indicators, as well as between geographic zones and population groups.

Over the past five years a programme signed with the IMF in December of 2002 has framed the Nicaraguan economy. The fiscal deficit, excluding donations, has fallen, which has made it easier to comply with monetary policy. In addition, the relief obtained through the Highly Indebted Poor Country and the Multilateral Debt Relief initiatives reduced external public debt in terms of GDP.

During 2006 and 2007 the performance of the Nicaraguan economy has been affected by the rise in international oil prices and of some industrial commodities. This has had a significant negative impact upon the terms of commercial exchange. High oil prices in particular affected the structure of production costs, led to interruptions in the electrical energy supply, caused domestic prices to climb and diminished the amount of available income.

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In 1997 Nicaragua signed a Free Trade Agreement (FTA) with Mexico. In 2006 the FTA with the United States (DR-CAFTA) went into effect. That same year Nicaragua signed and ratified an FTA with Taiwan. Negotiations are currently underway to sign an Association Agreement between Central America and the European Union.

In 2007 the incoming government signed its adhesion to the integration and cooperation project known as the Bolivarian Alternative for the Americas (ALBA). The government officially published its financial-economic programme for 2007-2012 in August of this year.

The new government has made manifest its intentions to preserve the past administration’s achievements as concerns macroeconomic stability, improve the investment climate, and ensure the continuity of external financing. In early October 2007 a new three-year agreement was signed with the IMF.

1.4 Description of energy sector

Overall characteristics

The energy system in a country is a reflection of its predominant social, economic, technological and environmental conditions. This is the case with Nicaragua as well. In accordance with the foregoing, the energy sector in Nicaragua can be described in the following manner:

• In comparison to countries with a similar level of economic and social development, per capita energy consumption in Nicaragua is low. For the year 2005 per capita consumption was of �.� oil barrels equivalent (OBE), the lowest in Central America, on a par with Honduras.

• Likewise, final per capita energy consumption is among the very lowest in Latin America (see Graph 1).

While the different types of energy are not consumed directly, their use is directly linked to the satisfaction of people’s basic needs. Thus low per capita energy consumption rates, together with inefficient energy use, reflect low standards of living and comfort among a country’s population, in particular if the unequal distribution of income and wealth are taken into consideration.


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Graph 1. Final per capita energy consumption 2005 (BEP / hab)

13.7

11.6 11.210.4 10.2

9.68.7

7.5 7.3 6.8 6.7

5.4 5.1 4.9 4.8 4.5 4.2 4.2 4.23.6 3.5 3.5 3.3 3.3

2.61.8

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Source: 2005 OLADE Energy Report

• Upon examining the consumption of electrical energy (“modern consumption”), the situation is even more worrisome. Among all countries on the continent, per capita electricity consumption in Nicaragua is higher only than that of Haiti (see Graph 2).

Graph 2. Per capita electricity consumption 2005 (kWh / hab)

4,75

4

3,13

5

3,06

9

2,95

3

2,74

5

2,43

2

2,10

0

1,92

8

1,87

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1,70

3

1,59

9

1,48

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1,35

6

1,29

2

1,05

9

902

846

800

775

762

670

565

504

444

367

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• The percentage of the population that enjoys access to electrical energy has remained relatively stable, with the exception of the years 1980 and 2002, when resources were used for rural electrification projects.

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• Another important aspect of electrical energy consumption is that 70.�% of customers consume less than 100 kWh. If those consuming between 100 kWh and 150 kWh are added in (16.2%), then 82.9% use a maximum of 150 kWh per month. However, these persons use up only 45.8% of the total amount of electricity consumed in the country.

• On the other extreme, 4.8% consume �00 kWh or more per month, or 27.8% of the total amount consumed (see graphs � and 4).

Graph 3. Residential consumption by frequency

Rango de Consumo

70,3

12,66,5 3,1 1,3 0,45,8

05

1015202530354045505560657075

kWh

cons

umid

os

0-100 101-150 151-200 2001-300 301-500 501-1000 1001 y más

Source: Study of Pricing and Subsidies Policy, National Energy Council (CNE), 2005.

Graph 4. Residential consumption by range

29.6

16.111.8 12.1

9.26.5

14.6

0

5

10

15

20

25

30

35

0-100 101-150 151-200 2001-300 301-500 501-1000 1001 y másRango de Consumo

kWh

cons

umid

os

Source: Study of Pricing and Subsidies Policy, CNE 2005.

• As mentioned, there exists a situation of high energy intensity. In addition to having one of the lowest GDPs and energy consumption rates per capita in Latin America, Nicaragua displays high energy intensity levels, second only to Honduras in the Central American region. This means that its energy consumption per unit of GDP is higher than the consumption of energy in other countries in the region with a similar level of development (see Graph 5).


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Graph 5. Energy intensity coefficient 2005 (OBE/thousands of USD)9.

5

7.7

7.4

4.9

4.7

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• There is a high degree of dependency on imported hydrocarbons, which combined with high oil prices made for an oil bill that in the year 2006 was equivalent to 65% of exports, the highest ever (see Graph 6).

Graph 6. Weight of the oil bill 1960-2006(importaciones CIF hidrocarburos/

exportaciones FOB)

0

10

20

30

40

50

60

70

1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

porcentaje

6 6 8

19

12

44

33

54

33

55

25

65

Source: Central Bank of Nicaragua and Nicaraguan Energy Institute (INE)

• Insufficient use is made of the country’s energy potential. While it has long been known that the country has substantial geothermal and hydroelectric potential, the persistent political and

2�


institutional crises and the prevalence of more pressing short-term problems have historically limited the adequate use of these energy resources.

• From 2001 to 2006, the only investments made were in renewable sources at the San Antonio and Monte Rosa sugar cane processing mills. During the harvest season (six month a year), each produces �0 MW derived from sugar cane bagasse.

• The use made of solar and wind energy is entirely insignificant (very marginal use of photovoltaic panels in isolated rural areas) and limited wind energy applications (also in rural areas).

• In geothermal energy, only 8 MW of a total of 66 MW projected at the San Jacinto Tizate plant have materialised. Along similar lines, the generation of geothermal energy at the Momotombo plant has only reached �0 MW of the 70 MW foreseen, (of these �0 MW, 7 MW are generated using a binary “bottoming unit”).

• As concerns the use of hydroelectric potential, the only investments made were the construction of Small Hydroelectric Power Plants in isolated rural areas such as El Bote, Bilampí and Río Bravo, for a total of less than 2 MW.

However, there are several hydroelectric and geothermal projects of different sizes and stages of study that have been awaiting implementation for decades.

The relatively small size of the energy markets in Nicaragua makes it necessary there be social, political and juridical stability, so as to diminish the perception of risk and thus attract the investments required for expanding the energy supply. Further, the influence of the government is vital in promoting a competitive climate in those segments where this is viable, while implementing effective regulation where it is not. The same can be said for its participation as an investor in strategic projects.

The strengthening of the energy sector is one of the priorities of the government of Nicaragua and forms part of a Complementary Agenda to the macroeconomic policies put forth in the 2007-2010 Economic-Financial Plan and which will be implemented in order to ensure sustained growth and poverty reduction. The Complementary Agenda states that during the period from 2008 to 2011 the government intends to take the necessary actions geared toward expanding and diversifying the electrical energy supply by promote renewable resource energy projects and using renewable energy resources.

The generation of electricity in the country is the main bottleneck facing any economic reactivation programme. Therefore a transformation of the energy matrix will be undertaken, creating a model that allows for generating energy from alternative sources, prioritising renewable energy. This is to be achieved through short and long term activities.


24

Nicaragua today is in the throes of an electrical energy supply crisis, which in practical terms translates into a lack of capacity by the sector to supply the population with its energy needs. This means there is ongoing rationing in place, which impairs the nation’s productive capacity and affects the population in all spheres of daily life.

It is estimated that approximately 60% of the population have access to electrical services. However, in rural areas that figure does not reach 40%. Although Nicaragua still has available significant sources of renewable energy, only scarce use is made of the energy potential contained in the natural resources available (hydroelectric, geothermal, solar and wind energy). Thus the country’s electricity generation matrix is predominantly thermal, leaving the country exposed to fluctuations in international oil prices1 (see Graph 6).

1 Nicaragua Energy Sector Strategic Plan.

25


ii. BAckGround And rAtionAle

2.1 Background

Nicaragua is a country endowed with significant geothermal potential due to the presence on its territory of the Los Marribios active volcanic mountain range, which stretches along the country’s Pacific coast.

The first studies on the potential use of geothermal energy were made in late 1960, but real impetus gathered from 197� onward, when the world oil crisis struck and had a negative effect upon the nation’s trade balance.

However, the commercial exploitation of geothermal resources began in earnest in 198�, when the Momotombo plant went online, starting operations with a �5 MW unit. A second such unit was introduced in 1989, raising installed capacity to 70 MW. Electricity production at the plant reached a maximum value of 468 GWh in 1992, but then decreased due to overexploitation of the field and lack of reinjection programmes.

In 1999 Ormat International Inc. and the Nicaraguan Energy Company (ENEL) signed an agreement according to which the former is to take over the rehabilitation and operation of the Momotombo plant and sell the electricity produced to ENEL for a fifteen-year period, whereupon the plant is to be devolved. In November 2002 a binary 7.5 MW unit went online, increasing installed generation capacity to the current 77.5 MW. However, today only one of the �5 MW units is in service. The second unit has been sent to the United States for repair, and is expected to resume operations before the end of 2007. However, the steam supply at Momotombo is insufficient to sustain production with both units.

A second geothermal field, San Jacinto – Tizate was evaluated in 1993. In three years, seven exploration – production wells were drilled, proving that the field was commercially viable. In 2003 the government of Nicaragua granted a concession for geothermal exploration to the San Jacinto Power Company (Polaris) to develop the field up to 66 MW. The first phase concluded with the installation of a 10 MW unit in July of 2005. The development of the 66 MW has been delayed and not materialized yet.

In addition, studies have been carried out in other areas. These were summed up and gathered in the Nicaragua Geothermal Resources Master Plan, which was carried out by the National Energy Commission in 2002. The Plan contains results ranging from basic, preliminary studies to detailed explorations in various zones, though with no deep drilling having yet taken place. The results of these studies have thus far served to verify the existence of at least ten areas in Nicaragua that are of geothermal interest, with a known potential estimated to be of at least 1,200 MW. Of these,


26

only Momotombo and San Jacinto – Tizate are currently being exploited at a level amounting to only �.75% of the total capacity.

In addition to these ten areas, there are thermal springs in different zones in Nicaragua, which while not attractive for the generation of electricity, may nonetheless be valuable auxiliary sources of income if used for therapeutic baths, harvesting of mineral water for human consumption, or as sources of heat for industrial and agricultural resources. Furthermore, secondary use (after electricity generation) of the resulting geothermal fluids may prove to be of great value to nearby populations, thus increasing opportunities for employment.

As part of the efforts to exploit the country’s geothermal potential, the Nicaraguan government held a tendering process in 2005 for two new concession areas for exploration. The concession was granted to GeoNica, a company with Salvadoran, Italian and Nicaraguan capital, for the two geothermal fields at El Hoyo – Monte Galán and Managua – Chiltepe. These fields have an estimated capacity of 200 MW and 150 MW, respectively. A concession contract was signed in August 2006, and exploration activities are underway at both sites.

In August 2006 Nicaraguan authorities opened bidding processes for exploration concessions in three additional areas: Mombacho Volcano, Casita Volcano and the caldera surrounding Apoyo lagoon. These processes are currently suspended. In 2004 the Government of Nicaragua requested technical assistance from Iceland for capacity building in geothermal development. The first steps toward reaching a cooperation agreement were taken with the visit to Nicaragua of a mission from that European nation, preceded by an authority from the Icelandic International Development Agency (ICEIDA) and the Iceland GeoSurvey (ISOR). The mission arrived with the aim of collecting information regarding two possible scenarios for cooperation: the exploitation of geothermal resources and the fishing industry.

In order to continue laying the groundwork for cooperation, three Nicaraguan officials were invited to Iceland in July of 2005. Two were from the National Energy Council (CNE) and one from the Nicaraguan Energy Institute (INE). The purpose of their visit was to deepen the exchange of experiences and define possible areas for cooperation and assistance between the two countries in the area of geothermal energy.

In September of that same year, three Icelandic experts came to Nicaragua and met with local energy sector and university authorities, in order to understand in detail the needs in the geothermal sector and define areas for cooperation. One of the results of this visit was a workshop on geothermal development in Nicaragua. The workshop was conceived of as an opportunity for officials from the various Nicaraguan government agencies and universities linked to the energy sector and to geothermal energy production in particular to meet with representatives of companies working on geothermal exploitation, and to exchange ideas with the experts from Iceland.

In January 2006 Iceland opened its Embassy in Managua, and on 26 June 2006 the first “Framework Agreement on Ways and Procedures for the Development of Cooperation between

27


the Government of the Republic of Nicaragua and the Government of the Republic of Iceland” was signed. The Agreement established as obligations that Iceland would “make available to the Government of Nicaragua financial assistance, material resources, technical assistance and training”, while Nicaragua committed itself to ensure “the effective use of the aforementioned assistance and opportunities for training”.

From 26 to 29 June 2006 a workshop was held under the title “Future of Geothermal Energy in Nicaragua and Icelandic Cooperation”. The occasion allowed for an open debate between stakeholders in geothermal energy, while providing an opportunity for establishing contacts and knowledge on what each party was doing regarding related issues. The workshop’s main goal was to promote the exchange of experience on geothermal issues between the two countries. Thus Nicaraguans learned of and became familiarised with the experience and capacity developed by Iceland in the energy sector, while Icelandic experts gathered information on Nicaragua’s real needs in the energy sector, and specifically in the geothermal sub-sector.

Discussion at the workshop centred on “Iceland and Energy Generation” as well as “Perspectives for Geothermal Development in Nicaragua and Icelandic Cooperation.” The future of geothermal energy in Nicaragua was reviewed, as was the possibility of cooperation between Iceland and Nicaragua on geothermal energy generation, and the role of the National Energy Commission and Nicaraguan Energy Institute in geothermal development.2

Additional subjects broached at the workshop were the experiences of both countries as regards the environment, political and legal aspects, geothermal development and exploitation, the uses of geothermal energy, reservoir management and monitoring, geothermal training needs and the future of cooperation between Nicaragua and Iceland.

The workshop’s main output was the Project Identification Document (PID), in which Nicaraguan and Icelandic authorities worked together and planned specific activities to be carried out in the geothermal sector cooperation project. In its conclusions, basic guidelines are set forth for the planning of a Nicaragua Geothermal Project with Icelandic support. The main emphasis was placed on capacity building in the development of geothermal energy. Icelandic and Nicaraguan authorities approved the Project Identification Document.

In January 2007 the new Government of Reconciliation and National Unity took office, and the Ministry of Energy and Mines (MEM) was created as the agency charged with planning, proposing, coordinating and implementing the Strategic Plan and Public Policy of the energy and geological resources sector. These were functions that used to be carried out by the National Energy Commission.

In this context ICEIDA proceeded to send the MEM and the Nicaraguan Electricity Company (ENEL) the Iceland – Nicaragua Project Identification Document outlining the capacity building

2 Proceedings of the First International Workshop on the Future of Geothermal Energy in Nicaragua and Icelandic Cooperation.


28

plan for geothermal development in Nicaragua, for the purpose of familiarising the incoming authorities in the energy sector. The occasion was also taken to invite the new authorities to visit Iceland for the purpose of strengthening bilateral relations between the two countries. The main thrust of Iceland’s cooperation is foreseen to be in the geothermal sector.

In February of 2007 a two-week visit took place by three Icelandic experts in geothermal energy. The main objective of the mission was to familiarise the incoming energy sector authorities with the background and current situation as reflected in the Project Identification Document between Iceland and Nicaragua, as well as continuing to identify and define the needs for assistance at the different government institutions and universities. Meetings were held with representatives of MEM, ENEL and the Ministry of the Environment and Natural Resources (MARENA), the National Autonomous University (León campus), the National Autonomous University (Managua campus), the National Engineering University (UNI) and the Central American University (UCA).

The conclusion and main recommendations made by the mission was that MEM and MARENA should draw up the terms of reference for the most immediate technical assistance requested at the aforementioned meetings.

The MEM had expressed its wish for assistance in the evaluation of the technical and financial investment plans in the fields of San Jacinto - Tizate and Momotombo that had been kept from the granting of the concession to date. Further, MEM expressed interest in an evaluation of the exploration phase currently underway at El Hoyo – Monte Galán and Managua – Chiltepe. For its part, MARENA requested training in strategic environmental planning for the energy sector, as well as follow-up to environmental impact studies and monitoring of geothermal exploration and exploitation. The report on needs identification was prepared by ISOR experts and finished in August 2006.

In March 2007 the National Assembly (parliament) of the Republic of Nicaragua approved the Framework Agreement between Nicaragua and Iceland, which, as mentioned was signed on 26 June 2006 by the Ministry of Foreign Relations and the Icelandic Ambassador to Nicaragua, thus formally initiating the process of assistance and cooperation in specific areas.

2.2 Rationale

Energy is a fundamental component in any sustainable development strategy, as it plays a decisive role in the quality of life of the population. The energy policy of the Government of Nicaragua has for its fundamental pillar the diversification of energy sources. The main reasons are supply security, a reduction of dependency on foreign countries and environmental protection. The development and sustainable use of energy must serve to promote economic development, but without overlooking the importance of environmental protection. Under these precepts, sustainable development requires that Nicaragua adopt a strategy that ensures the development of renewable energy resources and a long-term, good quality, timely, continuous energy supply at reasonable prices, without generating negative environmental impacts.

29


In order to achieve the objectives put forward in the Strategic Energy Development Plan there already exist, in the case of the geothermal sub sector, legal instruments such as the Law on the Exploration and Exploitation of Geothermal Resources (Law 44�) and the Law for the Promotion of Electricity Generation Using Renewable Resources (Law 5�2). These laws offer the necessary incentives, both economic and fiscal, for renewable energy generation projects, including guaranties for contracts entered into with energy distributors.

Geothermal energy constitutes a significant energy option for sustainable development. Its technical and economic feasibility as concerns the production of electricity at medium and large scales has been demonstrated internationally. In addition, it allows for a wide range of direct applications of heart in projects that have a high social profitability, including nurseries, the drying of grains and forest products, fish farming, recreation, and so on. All these may favour the carrying out of community-based productive activities in rural areas affected by poverty.

In this regard it is necessary, within the framework of the technical assistance project, to provide a clear vision of the situation Nicaragua finds itself in as regards the electricity sector, namely one of constant and recurrent energy crises, mainly for the following reasons:

1. The country’s electricity generation matrix is predominantly thermal, representing approximately 7�% of total electricity generation. This carries implicit that the cost of supplying electrical energy is inextricably related to the constant rises in oil prices.

2. Nicaragua makes only scarce use of its energy resources (hydroelectric, geothermal, solar and wind energy, etc.). Doing so would lower dependency upon imported hydrocarbons in the medium and short term.

3. There are insufficient investments in new generation plants in relation to the growing demand for electricity. This has led to a lowering of reserves at the Interconnected National System (SIN). Indeed, the sector has seen no significant investment in generation since 1998. Table 1 below shows the latest generation projects incorporated to the SIN since 1999.


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Table 2. Electricity generation projects incorporated to the SIN since 1999

Plant Type Source of energy Year Power (MW)

EEC 1- Corinto Thermal Bunker 1999 37

EEC 2- Corinto Thermal Bunker 2000 37

San Antonio Thermal Biomass 1999-2006 30

Monterrosa Thermal Biomass 2000-2006 30

San Jacinto Geothermal Geothermal steam 2005 8

4. Since the opening of the electricity sector to private investment the construction of thermal plants has been prioritised. This is due mainly to the relatively short time they take to install and the smaller investments required by these plants compared to those based on renewable sources, once there is installed capacity. However, in the case of thermal plants the cost of fuel, which in turn is subject to variations in international oil prices, is passed on to end users in its entirety. This is not the case with renewable natural resources.

The effects of the energy crisis have consequences that strongly affect all social sectors, as follows:

1. Energy rationing creates generalised unrest, in particular when such rationing is very severe – higher than 150 MW – and stretches over several hours per day, affecting the entire country, without distinction.

2. There have been substantial economic losses (in industry, commerce, agribusiness, tourism and so on), as well as social disruption (shortage of drinking water, hospitals and universities working on reduced capacity, an increase in citizen insecurity as towns and the capital city may be in the dark for hours at a time), all of which could potentially drive the country into a serious economic crisis.

�. Investors perceive an increase in the country risk, considering the low quality and unreliability of the electricity supply.

4. The persistent failure on the part of the distributor to honour its payment obligations not only limits production at already installed energy generating plants, but what is worse, inhibits potential interested parties from investing in new energy generation schemes, as the perception of risk concerning returns on their investment is considerably heightened.

5. There is a need for the state to guarantee the supply of electrical services, given the lack of investment by the private sector.

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In the Nicaragua Energy Sector Strategic Plan the government puts forth the following as its vision for the coming years:

“The energy sector must be a sector that makes use of the energy resources available in the country and encourages the efficient and rational use of energy, leading to sustainable development and a higher quality of life for the population. The expectation over the next five years is to significantly increase participation in electricity generation by using renewable sources such as geothermal, biomass, hydro, wind and solar energy.”

Currently, and despite Nicaragua’s geothermal potential, the country lacks technical experience as concerns its management, the necessary research, and resource exploration and exploitation. Specifically, MEM and MARENA need to improve capacity as regards geothermal development and the process to grant concessions, permits and licenses, as they are the national institutions responsible for follow-up, control and evaluation of geothermal production and environmental oversight to ensure a sustainable management of the resource.

Under the new government, MEM has taken over the functions that used to be a responsibility of the National Energy Commission, as well as the faculties and competencies regarding natural resources and nationwide administration of geological resources that once came under the aegis of the Ministry of Development, Industry and Commerce (MIFIC). In addition, MEM is now in charge of the exploitation of geothermal resources, formerly an INE responsibility.

By the authority granted it under Law 612�, MEM is charged with planning, proposing, coordinating and implementing the Strategic Plan and public policy in general in the energy sector. It is charged with drawing up the technical standards, criteria, specifications, rules and regulations that will govern the activities of reconnaissance, exploration, exploitation, production, transport, transformation, distribution, management and use of energy resources, as well as approving and making effective the technical norms for regulating the generation, transmission and distribution activities in the electricity sector upon receiving proposals to that effect from INE.

It also comes under the purview of the MEM to grant, modify, extend and cancel reconnaissance and concession permits for the use of any source of energy (geological or energy resources). Further, to grant licenses for the operation, generation and transmission of energy, as well as concessions for its distribution and the negotiation of contracts for the exploration and exploitation of geological resources. MEM also directs the functioning and administration of state-owned companies that operate in the energy sector.

Finally, it is a MEM responsibility to administrate and regulate the National Electrical Industry Development Fund, decrees, regulations and resolutions related to the electricity, hydrocarbons and geological energy resources, including the approval of their internal norms.

3 Law of Reform and Additions to Law 290, on the Organisation, Competencies and Procedures of the Executive Branch (29/01/07).


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For its part, MARENA is responsible for carrying out strategic environmental assessments, the environmental management of geothermal plants located in protected areas, and the promotion of clean development of geothermal production by making effective use of the environmental regulations that govern its exploitation.

To the overall weakness of government institutions must be added the lack of capacity at the universities to provide training in geothermal exploration, geochemistry and environmental impact studies concerning research, exploration and exploitation of geothermal energy, as well as follow-up, oversight and evaluation of geothermal production.

In this regard, the project intends to endow Nicaraguan institutions with responsibility in the area of geothermal energy (MEM, MARENA and universities), but also with the capacity to develop and explore, exploit and use its geothermal sources, thus allowing Nicaragua to develop them in a sustainable manner over the medium and long term.

Furthermore, the project is designed to train public officials and in some degree university staff active in the energy and environmental sectors as concerns geothermal exploration, geochemistry and environmental impact. Participants will take post-graduate courses and receive masters’ degrees upon having been exposed to concrete experiences in geothermal exploitation. The project will offer short and long-term assistance to national institutions involved in geothermal energy production, while providing the necessary equipment and materials to be used in the training processes.

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iii. overAll oBjective, components, Activities And outputs

The project concentrates on support to geothermal development in Nicaragua by encompassing three major areas of strategic importance: technical assistance; the training and education of human resources; and endowment with the equipment necessary to strengthen national capacity in coordination with the geothermal sector.

3.1 Overall objective

The overall objective is to enhance the utilization of geothermal resources in Nicaragua.

3.2 Components

The project has three components which reflect those areas in which cooperation has been requested by Nicaragua through the Ministry of Energy and Mines and the Ministry of the Environment and Natural Resources.

3.2.1 Component 1

To strengthen the capacity for technical and scientific supervision by the Ministry of Energy and Mines (MEM) and the Ministry of the Environment and Natural Resources (MARENA) to coordinate, supervise, monitor and develop the exploration and exploitation of geothermal resources in Nicaragua.

3.2.2 Component 2

Develop a process of building capacity for follow-up, monitoring, supervision, management and environmental oversight of geothermal development projects in Nicaragua, geared toward civil servants.

3.2.3 Component 3

Endow the geochemical laboratory at MEM with technical resources, infrastructure and equipment.

3.3 Expected outputs

3.3.1 Outputs component 1

1. A short and medium-term technical assistance project is developed for the creation of capacities at MEM as regards monitoring, follow-up and evaluation of the management and development of geothermal production in Nicaragua.


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2. Capacity is created at MARENA and MEM for the monitoring and evaluation of Environmental Impact Assessments (EIA).

�. Capacity is created at MARENA and MEM for the incorporation of the sustainable use of geothermal resources to the management plans for protected areas.

4. Strengthen the National Clean Development Office (ONDL) at MARENA and the Environmental Management Unit at MEM by applying the Clean Development Mechanism (CDM) to geothermal projects.


1. Technical capacity is created among public sector technicians and public servants for the supervision, monitoring and environmental oversight of geothermal development projects in Nicaragua.

2. Technical capacity is strengthened among government sector employees through other training techniques and the study of issues in support of the development of geothermal projects.


1. The MEM Investigation Unit is equipped and strengthened.

2. The geochemical laboratory at ENEL is transferred to MEM and is rebuilt and conditioned in order to supply the demand regarding development of research in geochemistry and geothermal production in Nicaragua.

3.4 Main project activities

The identification and description of activities allows for understanding the direction to be taken and the pace at which to proceed in each phase. However, this is an a priori forecast that must be interpreted with a flexible mindset, in the knowledge that it will likely be adjusted along the way, since reality tends to be more complicated when lived than when planned.

The main project activities are grouped into the following expected outputs.

3.4.1 Activities for Output 1, component 1

In the case of technical assistance for the building of capacity at MEM for the monitoring, follow-up and evaluation of management and development of geothermal production in Nicaragua, the project will carry out the following activities:

1. Provide technical assistance to MEM in order to evaluate the possibilities for increasing the generation of steam at the Momotombo geothermal field and evaluate the results of geoscientific

�5


research carried out by GeoNica in its exploration concession, as well as for the evaluation and management of the San Jacinto – Tizate reservoir.

2. Provide technical assistance for the drafting of policies intended to govern the implementation of geothermal projects and the evaluation of tendering processes for geothermal concessions.

�. Provide technical assistance in order to create the MEM Investigation Unit and determine its role and structure. Review the geothermal master plan, support the Investigation Unit activities, and validate the geochemical analysis methods being used. Review and update the geochemistry database.

4. Provide technical assistance to MEM for the identification of industrial potential in low enthalpy geothermal areas and for the heat pumps project for agricultural uses to be carried

out by MEM and UNAN León campus.


This output refers to technical assistance for building capacity at MARENA and UGA- MEM with which to monitor and evaluate Environmental Impact Assessments (EIA). The main activities are:

1. Provide technical assistance in order to review the scope of the Terms of Reference (ToR) and EIA documents on geothermal development activities in its different phases. Review the EIA methodology concerning geothermal projects and environmental audits of geothermal projects. Publish the manual and poster on steps for carrying out EIA.

2. Provide advisory services for the preparation of mandatory technical guidelines for geothermal projects and hold conferences, meetings and seminars on laws, environmental regulations and the development of geothermal resources in its different phases.


This output consists of technical assistance for the building of capacity at MARENA and MEM to include the sustainable use of geothermal resources in the management plans for protected areas (parks). The following activities are foreseen:

1. Technical assistance for identifying protected areas with potential and feasibility for geothermal development and the subsequent protection of natural assets in those areas.

2. Include the use of geothermal resources in the management plans for the volcanic complexes at Momotombo - Momotombito, Managua - Chiltepe, Telica, Santa Clara and El Chonco.


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This output is expected from the technical assistance being provided to strengthen the National Clean Development Office (ONDL) at MARENA and UGA –MEM so they are capable of applying the Clean Development Mechanism (CDM) to geothermal projects.

1. Strengthen the institutional framework of the ONDL and UGA-MEM as concerns the application of the CDM to geothermal projects.

2. Seek international consultancies for the preparation of a methodology for the sale of greenhouse gas emission reduction certificates at geothermal projects and publish information on the financing of geothermal projects under the CDM.


This output reflects the training of human resources in order to build capacity among public sector technicians and civil servants as concerns the supervision, monitoring and environmental oversight of geothermal projects in Nicaragua. The activities to be carried out are:

1. Implement a training programme with several levels of specialisation, such as post-graduate work, master’s degrees, technical courses, seminars, workshops and meetings.


This is also a output pertinent to the training of human resources, in this case with a view toward strengthening technical capacities among civil servants at government institutions and staff at universities and among private developers, through additional training techniques and the study of issues relevant to a geothermal project.

1. Implement a training programme with specialised courses on specific subjects, the exchange of experience and membership in international organisations that work with geothermal issues.


This output covers the endowment with technical resources, equipment and infrastructure to rebuild and condition the Investigation Unit at MEM. The planned activities are as follows:

1. Define the structure and framework for the functioning of the MEM Investigation Unit and endow it with furniture and office equipment.

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The output in this instance will be the endowment with technical resources, equipment and infrastructure to rebuild and condition the geochemical laboratory at MEM. The planned activities are as follows:

1. Rebuild and condition the MEM geochemical laboratory and provide it with additional work instruments and equipment, as well as human resources who have been properly trained in their uses and applications.


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iv. project milestones

The project titled “Iceland -- Nicaragua: Geothermal Capacity Building Project” contains five milestones. A milestone can be defined as an important change in the conditions prevailing before the project began when compared to the situation at its conclusion. In this instance, the positive changes will take place at the benefiting Nicaraguan ministries, namely the Ministry of Energy and Mines and the Ministry of the Environment and Natural Resources, and will assist them in meeting their respective responsibilities in the area of attention to geothermal production.

In the context of this project, then, a milestone is a point of reference that symbolises having obtained a major achievement, one that can be noted as progress even by persons who are not necessarily familiar with the project. It is a sum of the work done, the effort made, and signifies a point, a moment in the project that indicates there has been a qualitative change in comparison with conditions prior to the project.

1. A first milestone is the specialised technical assistance in the area of geothermal activity. This will allow for creating the necessary capacity with which to coordinate, supervise, monitor and develop the exploration and exploitation of geothermal resources in Nicaragua, thus overcoming an institutional weakness at MEM and creating conditions for institutional sustainability in the supervision and management of geothermal plants.

2. A second important milestone is the creation of the MEM Investigation Unit, which will be endowed not only with equipment and qualified human resources, but will also have a clearly defined role and set of activities to carry out. In addition, the Investigation Unit will provide services to the geothermal industry under self-sustainable conditions.

3. The certification and validation of the geochemical laboratory constitute a third milestone that marks quantitative changes in the MEM institutional capacity for managing research and providing attention to geothermal production.

4. A fourth milestone is related to capacity building at MARENA and MEM in order to manage the processes leading to the Environmental Impact Assessments at geothermal plants, as well as geothermal production in protected areas. This will lend greater comprehensiveness to MARENA’s mandate to promote and protect the environment and natural resources.

5. The fifth milestone concerns the development of capacity at MARENA and UGA-MEM to provide advisory services to project developers on the use of Clean Development Mechanisms for the purpose of selling greenhouse gas emission reduction certificates at geothermal projects. This will open up an area of institutional incentives for geothermal investments.

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project milestones

Project Duration

2008 2009 2010 2011 2012

• Technical assistance to coordinate, supervise, monitor and develop the exploration and exploitation of geothermal resources in Nicaragua.

• Creation of a Investigation Unit that provides services in the area of geothermal energy.

• Validation and operation of the geochemical laboratory.

• Environmental Impact Assessments and management of protected areas in which geothermal activity is to take place or already exist.

MARENA and UGA - MEM are able to promote the sale of greenhouse gas emission reduction certificates (GGE) at geothermal projects.


40

v. monitorinG And evAluAtion

The organisation of the project monitoring and evaluation system has for its point of reference the objectives, outputs and indicators set forth in the Logical Framework, as well as in the Overall Plan of Operations for the project’s five-year duration.

Monitoring is the process that systematically evaluates the quality of work over time and allows the system to react dynamically and effect change, if conditions so require.

The Annual Plan of Operation must be prepared each year. It should include deadlines and persons / institutions responsible for carrying out the work proposed in each activity and task to be carried out. Every six month will be a review of the progress of the Annual Plan of Operation.

Upon onset of project implementation a specific matrix should be drawn up for the purposes of monitoring and gathering information. The matrix should specify expected outputs, the baseline being used as the point of reference (project moment zero), identify activities and tasks to be evaluated, project participants, those charged with implementation, deadlines by which they should be completed, and the risks implicit.

To that end the project will set up a computerised monitoring and evaluation system, in such a way that the project has a practical operational base that facilitates coordination between the ministries and the experts providing technical assistance.

Monitoring will lead to the drafting of six month progress reports that contain the APO, Budget Programming and the technical and financial report concerning budget execution. This is to be accompanied by a narrative report on project development over the past six months, including forecasts regarding progress and a description of the outputs of the technical assistance and training events carried out.

A regulated occurrence shall be the presentation, after each activity, of an executive summary written by those responsible for implementation at each institution. This is to include a description of the outputs obtained, including the relation between real and budgeted cost, progress achieved, time period foreseen, and finally, recommendations for the follow-up and monitoring of these activities.

Two external evaluations for the project monitoring will be carried out along the five years. The first external evaluation will be an overall mid term evaluation and it is schedule for the second quarter of 2009, if necessary, adjustments will be made to the plans for project activities. A final external evaluation will be carried out at the end of the project.

41


vi. risk fActors

The risks that threaten any given project have more to do with the real context in which it is carried out than the intentions of those implementing it. Risks may emerge or be caused externally, but can also be internal to the project’s development, regardless of the good will underlying its conception. Thus risks must be taken into account and ways found to prevent, avoid, modify or mitigate them whenever possible, in order that they not undermine the project’s progress.

6.1 External factors

1. The Government of Nicaragua, but also the Nicaraguan state, each from its differing responsibilities, fail to take the necessary actions that favour the promotion and development of geothermal resources, thus generating a climate unfavourable to investment in the geothermal sector.

2. Absence of clarity and definition on the part of the government regarding the role of private enterprise and of the already existing concessionaires in the development of geothermal resources.

�. It is important to create incentives that stimulate national and international private sector involvement to assume the risk implicit in the pre-investment phase in geothermal energy development (exploration and exploitation of high enthalpy sources for the purpose of expanding electricity generation capacity).

4. In this regard it is necessary that state authorities take the initiative and give an initial boost to projects intending to make comprehensive use of resources, including those with low enthalpy, as these have a potential due to their social profitability that opens up an array of possibilities (industrial, commercial, recreational, etc.).

5. Another external risk might be the absence of a clear regulatory framework that transparently defines both public and private responsibilities regarding investments in geothermal

projects. This is a priority task for the state in its effort to promote the development of geothermal resources.

6. It is essential to integrate the geothermal development to energy generation plans from the perspective of sustainable development and to identify the available sources of financing, as these are the main restrictions that hamper the development of geothermal resources in Nicaragua.


42

7. Absence of a governmental commitment to the development of geothermal resources and limitations to the role assigned geothermal energy among the national options as set forth in the Nicaragua Energy Sector Strategic Plan.

8. The government’s decision to prioritise the development of geothermal resources in the country proves unsustainable.

9. Political instability: The weight that falls to private investors in the development of geothermal projects makes it necessary that the government guarantees a favourable investment climate that ensures their participation.

10. Juridical instability: It is crucial that legal mechanisms function within the framework of the rule of law, regulate conditions for access and use of geothermal resources, and are clearly defined, thus propitiating an attractive investment climate.

11. Economic instability: restrictions and/or a lack of economic incentives; the roles assigned to the market and to public intervention are unclear; the level of public spending committed to the development of geothermal resources is insufficient; the role assigned to private investment and its participation in resource development is not sufficiently attractive.

12. Failure to comply with contracts on the part of private companies developing geothermal projects.

1�. A national political crisis erupts, governance collapses, and external investment is discouraged, thus disturbing the harmonious development of geothermal activities.

14. Unfavourable natural conditions, considering that Nicaragua is a high-risk country as concerns recurrent natural disasters.

6.2 Internal risks

These are risks within the project itself, sometimes caused by participating actors.

1. Insufficient human resources: the government institutions fail to engage enough or sufficiently qualified staff to be incorporated to geothermal resources development activities.

2. There is a lack of coordination between the management of geothermal resources and the academic institutions in the country. At local level it is necessary to establish nexuses between government institutions in the area of geothermal energy and the universities.

�. The MEM fails to allocate the necessary budget for the proper functioning of the Investigation

Unit in geothermal resources.

4�


4. It proves impossible for the geothermal Investigation Unit at MEM to reach sustainability over time and work with its own resources in the national market, because local industry shows only scarce demand for its services.

5. Weak leadership from MEM in taking control of the project.

6. Deficiencies in the functioning of the project’s Steering Committee (SC).

7. Weakness in defining institutional mechanisms for oversight and follow-up to the functioning of the project Coordinating Committee (CC), which may negatively affect efficient management.

8. Low salaries at MEM and MARENA make it impossible for the ministries to retain their trained professionals.

9. Absence of (or insufficient) initiatives as concerns the promotion of projects intended to make comprehensive use of geothermal resources, including those with low enthalpy that may have a high social profitability due to the industrial and productive uses to which such resources may be put.

10. Difficulty on the part of Icelandic experts to comply with their training commitments due to excessive workloads.

11. Poor operational planning makes coordination between the project’s needs and the implementation of activities and planned tasks difficult to achieve.


44

vii. project timinG

The availability of funds tends to be concentrated in the project’s first two years, with over 57% of the total, with the remainder spread over the next three years.

Graph 7. Project funds by year (%)

29,126,3

16,6 15,312,8

05

1015202530

2008 2009 2010 2011 2012

Iceland’s technical assistance, in persons and funds, is concentrated in the firtst two years of the project (58% and 56.�%, respectively). In terms of person / days and funds the pattern between 2009 and 2012 is much the same.

Graph 8. Yearly distribution by days / person and funds of Icelandic TA (%)

0

5

10

15

20

25

30

35

2008 2009 2010 2011 2012

% días persona

% Fondos AT Islandia

12.611.715.21615.9

14.3

26

27.330.3

30.7

45


For their part, the training funds are spread more equitably over time, though with a significant concentration in years 2 and � of the project. When they reach 27.� and 27 % of the total, respectively, then dropping to 4.7 % in 2012.

Graph 9. Funds for training by year (%)

0

5

10

15

20

25

30

2000 2009 2010 2011 2012

19.7

27.3 27

21.3

4.7

The funds for equipment, materials and infrastructure tend to have a very high level of concentration in the first year, with almost 70% of the total funds. Another 28% are to be spent the second year, for a total of 98% of the total amount available.

Graph 10. Funds for equipment, materials and infrastructure (%)

0.8 0.8 0.8

0

20

40

60

80

2008 2009 2010 2011 2012

69.8

27.9

The annex includes the General Plan of Operations for the project’s five-year duration, with the number of days dedicated to technical assistance for each activity and task.


46

viii. project timetABle

The year 2007 was spent in project design and planning, as well as the implementation of technical assistance upon request of government institutions.

Total project duration is of five years, divided into three phases:

Phase 1: Implementation

Begins in 2008 and upon approval of the project document by the Icelandic International Development Agency and the Government of Nicaragua, extends to the year 2012.

Phase 2: Mid-term external evaluation and planning (second quarter 2009)

During the second quarter of 2009 an overall mid-term evaluation will take place. Outputs will be monitored, including a review of activities prioritised for the subsequent years. If necessary, adjustments will be made to the plans for project activities.

Phase 3: Project termination (fifth year 2012).

Each of the components draws to a close, and an overall final evaluation is made of the project in its entirety.

47


ix. BudGet

The budget for the five-year period 2008-2012 is of USD 4,231,515.8 8 (see annex 2). Yearly allocations are as follows:

Graph 11. Distribución % del presupuesto por año

0

5

10

15

20

25

30

2008 2009 2010 2011 2012

12,715,316,6

26,729,1

Table 3. Montos en U$ del presupuesto por años

2008 2009 2010 2011 2012 Total

Montos 1,229,565.8 1,112,1�4.8 702,7�7.2 645,799.7 541,278.� 4,2�1,515.8

% del total 29.1 26.7 16.6 15.� 12.7 100.0

1. During the first year the technical assistance (from Iceland and others) total component will use up 59.3 % of that year’s allocation and 17.3 % of the total budget. Over five years the technical assistance component represents 55.6% of the total amount budgeted.

2. During the first year the training component will use up 12.3% of that year’s allocation and 3.6% of the total budget. Over five years the training component represents 18.1 % of the total amount budgeted.

3. During the first year the equipment and infrastructure component will use up 15.0% of that year’s allocation and 4.3% of the total budget. Over five years the equipment and infrastructure component represents 6.2 % of the total amount budgeted.


48

4. During the first year, administrative expenses component will use 7.7 of that year’s allocation and 2.2% of the total budget. Over five years the administrative expenses component represents 11.9 % of the total amount budgeted.

5. During the first year the evaluation expenses represents 1.0 % of that year’s allocation and 0.3 % of the total budget. Over five years evaluations will take to 4 % of the total budget.

6. The sum set aside for contingencies amounts to 4.8% of the amount budgeted for each year of project duration. During the first year contingencies represent 4.8% of the year’s expenditures (1.4 % of the total for the five years). Over five years contingencies represent 4.8% of the total.

49


Table 4. Budget by component

Componentes 2008 2009 2010 2011 2012 Gran Total

Technical assistance 692,675.0 594,020.0 �62,025.0 �45,880.0 288,220.0 2,282,820.0

Percentage of each year’s allocation

56.� 56.1 47.9 5�.6 5�.2 5�.9

Total percentage of the budget 16.4 14.0 8.6 8.2 6.8 5�.9

Other Technical assistance �7,000.0 �4,000.0 - - - 71,000.0


�.0 �.1 - - - 1.7

Total percentage of the budget 0.9 0.8 - - - 1.7

Training 151,274.0 209,2�4.0 206,941.0 16�,589.0 �5,907.0 766,945.0


12.� 19.7 27.4 25.� 6.6 18.1

Total percentage of the budget �.6 4.9 4.9 �.9 0.8 18.1

Equip., Infrast 18�,906.0 7�,406.0 2,000.0 2,000.0 2,000.0 26�,�12.0


15.0 6.9 0.� 0.� 0.4 6.2

Total percentage of the budget 4.� 1.7 0.0 0.0 0.0 6.2

Administration 94,160.0 98,516.0 98,�07.6 10�,578.� 109,�76.2 50�,9�8.0


7.7 9.0 1�.7 16.0 20.1 11.8

Total percentage of the budget 2.2 2.� 2.� 2.4 2.6 11.8

Evaluation 12,000.0 50,000.0 - 80,000.0 142,000.0


1.0 4.5 - 14.7 �.�

Total percentage of the budget 0.� 1.2 - 1.9 �.�

Sub-Total 1,171,015.0 1,059,176.0 669,27�.6 615,047.� 515,50�.2 4,0�0,015.0


95.2 95.2 95.2 95.2 95.2 95.2

Total percentage of the budget 27.7 25.0 15.8 14.5 12.2 95.2

Contingencies 58,550.8 52,958.8 ��,46�.7 �0,752.4 25,775.2 201,500.8


4.8 4.8 4.8 4.8 4.8 4.8

Total percentage of the budget 1.4 1.� 0.8 0.7 0.6 4.8

Grand Total 1,229,565.8 1,112,1�4.8 702,7�7.2 645,799.7 541,278.� 4,2�1,515.8

Total percentage of the budget 29.1 26.7 16.6 15.� 12.7 100.0


50

x. project strAteGy

As stated earlier, the overall project objective is to “enhance the utilization of geothermal resources in Nicaragua.” This is to be achieved via three components, as requested by the ministries involved.

The first component is technical assistance, which is to be provided by professionals that are experts in the following areas:

1. Evaluations of thermodynamic conditions at the geothermal reservoirs and their management and steam production, for the purpose of analysing the expansion of steam generation in geothermal fields, the evaluation of geoscientific research outputs, the preparation of geothermal projects and the evaluation of tendering processes for geothermal concessions.

2. Geothermal research, training for the use of geochemical laboratory equipment and the identification of industrial potential in high and low enthalpy geothermal fields.

�. Elaboration of terms of reference, evaluation and methodology of Environmental Impact Assessments (EIA) for geothermal projects, environmental audits of geothermal projects and drafting of mandatory technical regulations for geothermal projects.

4. Identification of protected areas in which it is feasible to develop geothermal potential, for the protection of natural values in protected areas with geothermal potential and include the sustainable use of geothermal resources in the management plans for volcanic complexes.

5. Application and management of the Clean Development Mechanism in geothermal projects and the preparation of a methodology for the sale of carbon dioxide emission reduction certificates upon establishment of geothermal projects.

The second component, on training / education of human resources, includes the following:

1. Creating capacities among public sector technicians and civil servants as regards supervision, monitoring and environmental oversight of geothermal development projects, through training at different levels of specialisation: post-graduate, master’s programmes, technical courses, seminars, workshops and meetings, specific courses, exchanges of experience and memberships in international organisations that work and publish on issues related to geothermal energy production.

The third component covers endowment with technical resources, equipment and infrastructure, with the following outcome:

51


1. An Investigation Unit is established at MEM, with a defined structure, a framework for its functioning, and the equipment necessary at a geochemical laboratory.

In order to carry out the technical assistance component, experts will visit Nicaragua during the project’s five-year duration (1,625 days). They will work directly with technicians from the Ministry of Energy and Mines and the Ministry of the Environment and Natural Resources, to whom they will transmit knowledge intended to satisfy the needs put forth by the two ministries.

As concerns clean development, the project will provide resources so that experts from other countries can provide technical assistance.

The technical assistance process will be accompanied by training in formal university courses and other shorter courses, including the exchange of experience and internships in Iceland. These studies will be set up in such a way that they reflect Nicaragua’s needs on geothermal issues. It is also foreseen there will be short courses and specific seminars with experts in geothermal development from the region (i.e. El Salvador and Mexico).

The endowment by the project of technical equipment, auxiliary instruments, materials and the conditioning of the infrastructure will complete the technical assistance and training processes, thus ensuring that the ministries and their technicians are in condition to comply with the legal mandate of coordinating, supervising, monitoring and developing the exploration and exploitation of geothermal resources in Nicaragua.


52

xi. implementAtion strAteGy

11.1 Project design

The project is designed for the purpose of creating capacities at government institutions in order to facilitate the use of autochthonous geothermal resources for the production of electrical energy.

Nicaragua requires external technical assistance in all project components. These specific needs have been defined for each case or activity through Terms of Reference that were presented by the Ministry of Energy and Mines and the Ministry of Natural Resources and the Environment.

11.2 Implementation

For purposes of project implementation two committees will be established, namely a Steering Committee and a Coordination Committee. These will include representatives of the Government of Nicaragua and the Icelandic International Development Agency.

Each component will be implemented in an independent manner, and a written report on each activity and task undertaken is required.

11.3 Development strategy

The project development strategy is based on a combination of technical assistance in the form of short-term consultancies, advisory services rendered by experts over medium-term periods, education and training courses, and the delivery of equipment, material and infrastructure. Taken together, these will allow the ministries involved to exercise their functions as concerns geothermal development (MEM) and the environmental protection of areas in which said development is taking place (MARENA), as per their respective organic laws.

The technical assistance offered by experts and consultants will strengthen and build the necessary capacity at participating ministries. This will facilitate the development, monitoring and supervision of the country’s geothermal projects.

The support material and technical equipment to be delivered to the Investigation Unit at the MEM will allow for making progress with investigations concerning geothermal resources in Nicaragua (both low and high enthalpy), while facilitating the development of the geothermal industry, both public and private, as a result of the installation of a specialised, certified and validated geochemical laboratory.

The training of human resources includes courses to be taken at the United Nations University Geothermal Training Programme in Iceland, and other specialised centres in the Mesoamerican

5�


region. Trainees will take post-graduate and master’s courses, but also attend short-term training events, workshops and seminars.

In addition, technical assistance will be carried out in close collaboration with professional staff at MEM and MARENA, for the purpose of maximising the positive impact of the transfer of technology and capacity building within each of the Nicaraguan institutions.

11.4 Project management

The project titled “Iceland -- Nicaragua: Geothermal Capacity Building Project”, to be implemented in the framework of cooperation between Iceland and Nicaragua, in accordance with the Framework Agreement signed on 26 July 2006 between the governments of the two countries will be governed by the laws of the Republic of Nicaragua and the mandate bestowed by national law and enabling regulations upon the Ministry of Energy and Mines, as well as the regulations and policies of ICEIDA, as set forth in the document titled “ICEIDA Policy and Plan of Operations” (see document in the annex 7). The project will be organised in such a way that there are three hierarchically organised implementation, coordination and management levels, as follows:

1. The management and decision-making level: Steering Committee

• Project management and decision-making will be the responsibility of the Steering Committee, with four persons on it:

- two representatives of Nicaragua, appointed by the Ministry of Energy and Mines (the Director General of the project counterpart unit and a specialist on geothermal issues);

- the representative / director of ICEIDA – Iceland in Nicaragua; and

- an ICEIDA external technical advisor on geothermal issues.

• Each institution will officially appoint its representatives to the SC.

2. The coordination and monitoring level: Coordination Committee

• For purposes of project coordination and monitoring the Steering Committee will appoint a “Coordination Committee”, charged with project coordination, monitoring and management. It will consist of two persons:

- a Nicaraguan civil servant from the technical area, to be appointed by MEM; and

- an ICEIDA representative from the technical area, to be appointed by ICEIDA.

�. The implementation level: departments or units at MEM and MARENA charged with carrying out project activities and tasks.


54

The diagram immediately below illustrates this organisational model:

Steering Committee (MEM, ICEIDA)

MEM MARENA

InstitutionalAssistance

Training

Decision-making

Coordination,Monitoring and management

Implementation

Equipment

Coordination Committee(MEM, ICEIDA)

11.5 Project Steering Committee responsibilities.

1. The Steering Committee (SC) is the project’s highest authority, charged with approving the Annual Plan of Operations, the budget plans and the Coordination Committee reports, as well as following up on project implementation.

2. The SC will appoint a General Coordinator from among its members. He / she will represent the project in its interinstitutional relations, and will keep up official communication with the Minister of MEM and the ICEIDA director.

�. The SC will meet once every six months in ordinary sessions, or through extraordinary sessions if deemed necessary.

4. The SC will appoint the project Coordinating Committee (CC), which is made up of two members, one representing MEM and the other representing ICEIDA.

5. The SC must approve the bi-annual report produced by the Coordination Committee regarding project progress. This report is to be delivered to MEM and ICEIDA.

6. For their work on the project those persons appointed to the SC by MEM, ICEIDA will not receive a salary, stipends or remuneration of any kind.

55


7. The SC will take decisions by consensus, and the persons on the committee will have equal rights and duties vis-à-vis the project.

11.6 Project Coordinating Committee functions

1. The project Coordinating Committee (CC) will be in charge of project follow-up, and will have its functions established and approved by the SC. The latter will have the authority to assign any additional functions if considered pertinent.

2. The CC will be responsible for project coordination, monitoring and evaluation.

�. CC members must keep the SC informed of any relevant aspect or occurrence at the project.

4. The CC must draft a Project Progress Report each semester and deliver it to the SC (see section �.2.4).

5. For their work on the project those persons appointed to the CC by the Steering Committee will not receive a salary, stipends or remuneration of any kind.

6. The CC will take decisions by consensus, and the persons on the committee will have equal rights and duties vis-à-vis the project.

11.7 Level of implementation

The implementation level involves all authorities, committees, departments, areas, units or offices responsible for carrying out work related to the project. The implementing institutions with responsibility for the activities planned are MEM and MARENA.

The two Nicaraguan ministries are the project implementers on behalf of the Government of Nicaragua. They are responsible for carrying out the activities listed in each project component, together with external consultants. Upon concluding an activity, MEM, MARENA and their respective divisions or units must draft and deliver the applicable reports to the CC.

11.8 Monitoring and evaluation reports

The CC must deliver bi-annual reports to the SC, including a Plan of Operations and Budget Planning, as described in the Project Document. This is to be accompanied by a technical report, a financial report on budget implementation, and a narrative report describing the situation at the project over the six previous months in relation to the timetable and activities scheduled for that period. The Progress Report must also include a forecast on future progress, as well as expected outputs of technical assistance and training events, for approval by the project SC.

Upon conclusion of each activity those in charge of its implementation at each institution must deliver an executive summary of the outputs obtained to the CC. This report is to include information


56

on real cost / amount budgeted, progress achieved / time allocated, goals set / goals achieved, as well as recommendations for follow-up and monitoring of these activities.

Whenever there exists even the slightest possibility that a problem or contingency is emerging or exists, which might have a serious and significant impact upon project implementation, the CC must immediately produce a Warning Report and deliver it to the SC.

11.9 Procurement of material assets, equipment and services

The procurement of goods and services for the project will be a responsibility of the ICEIDA office in Managua, which is to comply with and follow the procedures established by ICEIDA in the document titled “ICEIDA Policy and Plan of Operations”. Purchases will take place in a coordinated manner and in cooperation with the local project counterpart.

The project is defined by the Ministry of Energy and Mines as a technical assistance, training and goods/equipment donation project. Article 54 of the Financial Administration and Budget System Law (Law 550) reads as follows:

“On income derived from credit and donations operations: the international credit and donation operations shall be governed by that which is established in the pertinent international conventions and / or contracts, duly approved by the National Assembly, and which are to be reflected in the Annual National Budget Law.

If after introduction of the Annual National Budget Bill incomes are formalised and derived from international donations or credit operations duly approved by the National Assembly, and which for that reason are not part of the budget exercise in force, the Ministry of Finance and Public Credit will prepare a modification to the Annual National Budget Law, with a view toward incorporating these incomes and authorising their execution, using the budget modification mechanism set forth in article 51 of this law.”

57


xii. components

12.1 Component 1. Technical Assistance

12.1.1 Scope of the Technical Assistance Component

The Technical Assistance Component is conceived of as a process of technical, “on the job” training for staff from the Ministry of Energy and Mines (MEM) and the Ministry of the Environment and Natural Resources (MARENA), in an effort to create and strengthen institutional capacities for the coordination, supervision, monitoring and development of the exploration and exploitation of Nicaragua’s geothermal resources.

The component includes short and medium-term assistance, provided by experts from Iceland and other countries. This assistance is to be provided during the five years (2008 – 2012) of project implementation, covering each of the phases in the development and monitoring of geothermal activities for which Nicaragua has requested support.

12.1.2 Background and rationale

Due to its complexity, geothermal development requires high levels of technical specialisation. This is precisely where Nicaragua and the agencies responsible for supervising and monitoring geothermal projects in its various phases display weaknesses. Thus MEM and MARENA, the ministries most directly involved in the coordination, supervision, monitoring, follow-up and evaluation of the process of studying, exploring and exploiting geothermal resources, must create suitable technical capacities in order to assume the leadership of said process in the respective areas of competency of each.

At the MEM there is only weak technical capacity as regards follow-up and evaluation of the various phases of the process of geothermal exploration and production, as well as those aspects related to regulations, tenders and oversight of geothermal concessions. Thus there exists a need and demand for short and medium-term technical assistance that will allow the institution to improve its capacity to supervise and if necessary intervene in the work undertaken by concessionaires in geothermal areas and projects.

For its part, MARENA is promoting the modernisation of its Environmental Management Systems. Technical assistance is essential in order to incorporate the perspective of geothermal exploration and exploitation in this process. This will make for improving the efficiency and efficacy of the monitoring and evaluation of environmental impact studies in geothermal production and the handling of impacts generated by the exploitation of geothermal resources in its different phases, with emphasis on the sustainable development of geothermal resources in protected areas, among


58

which is the Maribios volcanic mountain range and indeed almost all the main areas of geothermal interest in Nicaragua.

These are very important issues, for while it is true that MARENA has expertise in the follow-up and oversight of other types of natural resource exploration in protected areas, this is not the case when it comes to geothermal resources. This makes it more difficult to protect the natural values and ensure their coexistence with geothermal development projects.

12.1.3 Objectives

To strengthen the capacity for technical and scientific supervision at the Ministry of Energy and Mines and the Ministry of Natural Resources and the Environment for the monitoring, oversight and follow-up to geothermal resources development projects in Nicaragua.

12.1.4 Beneficiaries

The technical assistance process is geared toward the Ministry of Energy and Mines and the Ministry of Natural Resources and the Environment, and is intended to strengthen the technical capacity of their teams in the Geothermal Department, the Investigation Unit and the Environmental Management Unit at MEM and the projects the ministry has in coordination with UNAN León campus. At MARENA technical assistance is planned for the General Directorate for Environmental Quality, the Protected Areas Division and the National Clean Development Office.

Also benefiting will be technicians at the MARENA provincial delegations, the mayor’s offices and other institutions as the national universities and private developers involved in geothermal activities, as well as participants in the workshops on adequate technical guidelines for mandatory environmental regulation of the sustainable development of projects using geothermal resources.

12.1.5 Outputs and activities

Outputs will be obtained by uniting efforts in the various activities and tasks to be distributed among the five years of project implementation.

There follows a description of the main activities for each of the outputs expected from the technical assistance component.

a. Output 1:

A short and medium term technical assistance project is developed for the creation of capacities at MEM as regards monitoring, follow-up and evaluation of the management and development of geothermal production in Nicaragua.

59


b. Activities R1

A1: Provide technical assistance to MEM in order to evaluate the Momotombo reservoir and investigate possibilities for increasing the generation of steam at the Momotombo geothermal field.

A2: Provide technical assistance to MEM in order to evaluate the results of geoscientific research carried out by GeoNica in its exploration concession and during potential subsequent development on the concession.

A�: Provide technical assistance to MEM for the evaluation of the San Jacinto – Tizate reservoir management and the ongoing drilling activities and subsequent development.

A4: Provide short-term technical assistance for the drafting of norms and standards for geothermal development and evaluation of tendering processes for geothermal concessions.

A5: Provide short-term technical assistance in order to determine the role and structure of the MEM Investigation Unit.

A6: Provide short-term technical assistance for the review of the geothermal master plan. A7: Accompany the Investigation Unit activities with short and medium term technical

assistance.

A8: Validate the geochemical analysis methods being used.

A9: Review and update the geochemical data base.

A10: Provide technical assistance to MEM for the identification of industrial potential in low enthalpy geothermal areas.

A11: Provide advisory services to MEM and UNAN León campus for the heat pumps project.

A12: Provide technical assistance to MEM and UNAN León campus for identification of high enthalpy potential for direct use application.

c. Output 2:

Capacity is created at MARENA and UGA-MEM for the monitoring and evaluation of Environmental Impact Studies (EIA).


60

d. Activities R2

A1: Provide short and medium-term technical assistance in order to review the scope of the Terms of Reference (ToR) and EIA documents on geothermal development activities in its different phases.

A2: Hold workshops in order to review the EIA methodology concerning geothermal projects.

A�: Provide advisory services for the preparation of ToR for the EIA of geothermal concessions, the review of EIA documents and the environmental audits of geothermal projects.

A4: Publish the manual and poster on steps for carrying out EIA.

A5: Provide advisory services for the preparation of mandatory technical guidelines governing geothermal projects.

A6: Hold conferences, meetings and seminars on laws, environmental regulations and the development of geothermal resources.

e. Output 3:

Capacity is created at MARENA and UGA-MEM for the incorporation of the sustainable use of geothermal resources to the protected area management plans.

f. Activities R3

A1: Identify protected areas with potential and feasibility for geothermal development.

A2: Establish a baseline of protected areas with geothermal potential.

A�: Develop the capacity to protect natural assets in protected areas with geothermal potential.

A4: Include the use of geothermal resources in the management plans for the volcanic complexes at Momotombo - Momotombito, Managua - Chiltepe, Telica, Santa Clara and El Chonco.

g. Output 4:

Strengthen the National Clean Development Office (ONDL) at MARENA and the Environmental Management Unit (UGA) at MEM by applying the Clean Development Mechanism (CDM) to geothermal projects.

h. Activities R4

61


A1: Strengthen the institutional framework of the ONDL and UGA-MEM as concerns the application of the Clean Development Mechanism to geothermal projects.

A2: Train ONDL technical staff at MARENA and UGA technical staff at MEM specialising in Development Mechanisms, such as the Andean Development Centre, the Bariloche Centre, etc.

A�: Seek international consultancies for the preparation of a methodology for the sale of greenhouse gas emission reduction certificates.

A4: Prepare the CDM methodology for geothermal projects and submit it to appraisal for the sale of greenhouse gas emission reduction certificates.

A5: Publish information on the financing of geothermal projects under the CDM.

12.1.6 Inputs

For purposes of implementing technical assistance, a combination of advisory services is required by means of short and medium-term consultancies. These are to take place during the project period, so that the personal presence and assistance provided by experts in the different phases of geothermal production allows national technicians to gain knowledge and theoretical / practical experience in the supervision and monitoring of geothermal projects.

a. Work (what will be done)

The technical assistance process will be developed during the five-year duration of the project. Each of the activities leading to the achievement of expected outputs will be carried out directly by MEM and MARENA civil servants, with the accompaniment of experts from Iceland and other countries. This will ensure adequate training regarding the needs of the ministries and the assistance requested.

b. Training

The specialised training process services for staff at MEM, MARENA and UNAN León campus will be carried out through the technical advisory services being provided. The aim is to create technical capacities at these institutions that become an important component of the process of institutional strengthening at participating ministries.

In addition, the technical assistance is to take place in close collaboration with professionals from MEM and MARENA, for the purpose of maximising the transfer of technology and creation of capacity within each Nicaraguan institution.


62

c. Staff

For the implementation of this component of technical assistance will be necessary the participation of expatriate experts and consultants and this will be determined through ToRs based on expected outputs and the activities defined.

d. Timetable

The project has been planned for implementation over the 2008-2012 five-year period. Taking this five-year plan as a point of departure, Annual Plans of Operation (APO) are to be defined in such a manner that the specific distribution and carrying out of these activities and tasks are established for each one of the five years.

12.1.7 Technical assistance component indicators

The technical assistance component includes a number of indicators that serve as one of the most important elements by which to evaluate the project, as they allow for measuring the activities and tasks carried out in an objective manner.

1. During the first semester of 2008, MEM develops the capacity to evaluate the Momotombo reservoir.

2. Studies are carried out by MEM over the five-year project period in order to investigate the possibility of increasing productive capacity for energy production at Momotombo.

�. In 2008 MEM acquires the institutional capacity to interpret the results of surface research and evaluate the decision to drill wells on the Managua-Chiltepe slope.

4. MEM correctly evaluates the final report of the exploration concession granted GeoNica for 2008 and 2009.

5. In 2010 GeoNica is granted an exploitation concession and an energy generation license.

6. At project conclusion MEM has acquired the capacity to monitor and evaluate the development phase of the GeoNica concession.

7. Before the project conclusion MEM evaluates the GeoNica plant design and surface equipment.

8. MEM has the capacity to supervise well drilling at San Jacinto – Tizate in 2008 and 2009.

9. MEM correctly evaluates the management of the San Jacinto – Tizate reservoir for the duration of the five-year project.

10. During the first semester of 2008, MEM prepares adequate technical guidelines for supervision of exploration and exploitation of geothermal resources.

11. MEM develops the capacity to evaluate tendering processes for geothermal concessions during 2008 and 2009.

12. In 2008 activities are identified that are to be carried out by the MEM Investigation Unit.

6�


1�. Research is undertaken on market conditions for the provision of services to the industry by the geochemical laboratory, which is to be validated in 2009 and accredited if it is necessary before the end of the project.

14. In 2008 MEM defines the relation between the Investigation Unit and the geothermal supervision team.

15. In 2008 MEM completes the review of the Geothermal Master Plan, specifying areas in which prefeasibility studies need to be carried out.

16. During the project’s five-year duration, MEM develops capacity for carrying out high and low enthalpy studies regarding geothermal resources.

17. The MEM Investigation Unit has the capacity to sell geochemistry services to the industry, starting in 2009.

18. In 2008 and 2009 the MEM Investigation Unit standardises its methods, processes, equipment and human resources, and redefines the sample points.

19. In 2010 and 2011 MEM and UNAN León campus identify the industrial potential for low enthalpy geothermal areas.

20. In 2008 and 2009 MEM and UNAN León campus successfully develop an agricultural use project for heat pumps.

21. During the first semester of 2008 MARENA prepares the ToRs for the environmental impact studies to be carried out at San Jacinto – Tizate.

22. In 2008 MARENA reviews and evaluates the EIAs at San Jacinto – Tizate, El Hoyo – Monte Galán and Managua – Chiltepe.

2�. During the period from 2009 to 2012 the EIAs and environmental audits carried out by MARENA are followed up on.

24. Between 2008 and 2009 MARENA and MEM has defined the methodology by which to evaluate the EIAs in order to be able to determine the quality of the report and the environmental monitoring plan for geothermal projects.

25. During the first semester of 2008 MARENA and MEM consults, prepares and publishes adequate technical guidelines for mandatory environmental regulation of geothermal projects.

26. In 2008 MARENA holds local training workshops with the mayors offices, MARENA territorial delegations and other actors on environmental regulations for geothermal projects.

27. MARENA publishes and disseminates a document and poster with the steps to be taken in carrying out EIAs.

28. In 2009 coordination has been established between MARENA and the universities regarding the EIAs.

29. In 2009 meetings are held at MARENA on environmental laws.

30. In 2008 MARENA and MEM identifies protected areas with geothermal potential.

31. In 2008 MARENA and MEM identifies protected areas with geothermal potential and establishes their feasibility for development.


64

�2. In 2008 MARENA and MEM prepares a baseline for protected areas with geothermal potential.

��. MARENA and MEM develop the capacity to protect natural assets in protected areas with geothermal potential.

34. During the project’s five-year duration, MARENA includes among its management plans (already carried out or about to be) the use of geothermal resources at the volcanic complexes of Momotombo-Momotombito, Managua-Chiltepe, Telica, Santa Clara and El Chonco.

�5. MARENA and MEM hold two training sessions for the ONDL and UGA-MEM technical staff (one in 2008, followed by an update in 2010), working with institutions specialising in Development Mechanisms, such as the Andean Development Centre, the Bariloche Centre, etc.

�6. In 2009 MARENA and MEM receives an international consultancy geared toward preparing the methodology for the sale of greenhouse gas emission reduction certificates as an outcome of the geothermal projects.

�7. In 2009 MARENA and UGA-MEM prepares the CDM methodology for geothermal projects and submits it to appraisal regarding the possible sale of greenhouse gas emission reduction certificates.

38. During the project’s five-year duration the information produced on the geothermal projects and the CDMs are published and disseminated.

12.1.8. Monitoring and Evaluation

The project will organise monitoring and evaluation based on the logical framework matrix and the general APO for the five-year project period (see annexes).


To that end a specific matrix should be drawn up for the purposes of monitoring and gathering information. The matrix should identify project activities and tasks to be evaluated, those charged with implementation, deadlines by which they should be completed, and the risks implicit. Thus the project will have a practical base of operation that facilitates coordination between the ministries and experts providing technical assistance.

12.1.9 Work Plan

The Annual Plan of Operation must be prepared each year and also a review and planning every 6 months will be carried out. It should include deadlines and persons / institutions responsible for carrying out the work proposed in each activity and task to be carried out.

65


12.1.10 Progress reports

The Coordination Committee is to deliver a Project Progress Report to the Steering Committee each semester, along with the APO, and the Budget Programming for technical assistance, including the technical and financial report concerning budget execution. This is to be accompanied by a narrative report on project development, including references to the timetable established for each period and forecasts regarding progress as concerns technical assistance and its results.

12.1.11 Factors influencing the project

There are factors that may limit or hamper the success of a project. These may be internal in nature, subject to an influence that minimises its impact upon the project. But they can also be external, and beyond the will of those implementing the project. These must be taken very much into account, as they can contribute to undermine the success of the project.

The factors that exert an influence upon the technical assistance component of the project titled “Iceland -- Nicaragua: Geothermal Capacity Building Project” are as follows:

Internal

• Weak leadership from MEM in taking control of the project.

• Deficiencies in the functioning of the project’s Steering Committee.

• Weakness in defining institutional mechanisms for oversight and follow-up to the functioning of the project Coordinating Committee, which may negatively affect efficient management.

• The MEM is unable to keep its trained professionals, due to low salaries.

• Absence of (or insufficient) initiatives as concerns the promotion of projects intended to make comprehensive use of geothermal resources, including those with low enthalpy that may have a high social profitability due to the industrial and productive uses to which such resources may be put.

• Difficulty on the part of Icelandic experts to comply with their training commitments due to excessive work loads.

External

• A national political crisis leads to a situation in which governance collapses.

• Unfavourable climate conditions (natural disasters).

• Absence of government policies that favour the promotion and development of geothermal resources. Failure to create a climate favourable to investment in the Nicaragua geothermal sector.


66

• Absence of a national strategy for developing geothermal resources.

• Absence of a regulatory framework that transparently defines both public and private responsibilities. This is a priority task for the state in its effort to promote the development of geothermal resources.

• Absence of (or insufficient) incentives that stimulate private sector participation in geothermal energy development.

• Failure to promote pre-investment in the exploration and exploitation of high enthalpy geothermal sources, for the purpose of expanding the capacity for generating electricity.

12.1.12 Budget

The implementation of the technical assistance component has a cost of two million three hundred and fifty three thousand eight hundred and twenty United States dollars (USD 2,353,820.00), distributed over time as shown in the graph immediately below. Includes technical assistance from Icelandic and other experts (see annex �).

Distribution of funds for technical assistance over five years (in %)

3126,7

15,414,7

12,2

0

5

10

15

20

25

30

35

2008 2009 2010 2011 2012

12.2 Component 2. Training

12.2.1 Scope of the training component

The training component is geared toward implementing a process of institutional capacity building for purposes of follow-up, monitoring, supervision, management and environmental oversight of Nicaragua’s geothermal development projects. It is aimed essentially at civil servants.

67


In addition to the participation of civil servants at formal training events such as post-graduate courses or master’s programmes, the component includes meetings, seminars and the exchange of experience, all as part of the effort to create and build capacity. Professors from state universities and staff at private geothermal project developers may also attend the seminars and exchanges of experience.


At those government institutions that are involved in follow-up, supervision and implementation of geothermal projects, capacities are needed that facilitate the monitoring of projects intended to exploit geothermal resources for electric energy production and industrial uses in the future.

The technicians and employees of these governmental institutions are not experts in the technical and scientific aspects of follow-up, monitoring and production of geothermal energy, although a few of them may have a general knowledge thereof. It is therefore necessary to implement training on aspects that serve to bolster them in the performance of their functions (such as geographic information systems and English).

There is a need and demand for developing human resources that encompasses participation in the United Nations University Geothermal Training Programme in Reykjavik, Iceland and other specialised centres in the region. Participants will be exposed to post-graduate courses, master’s programmes, short technical studies, workshops and seminars.

Capacity building covers the spectrum from knowledge of environmental law to the EIA system and its guidelines on the development of geothermal projects in protected areas, by way of specific and specialised aspects related to each of the phases in the implementation of a geothermal project.

12.2.3 Objective

The main objective is to develop a capacity building process for follow-up, monitoring, supervision, management and environmental oversight of geothermal development projects in Nicaragua, geared toward civil servants.


The training component is aimed at technicians and civil servants at MEM, MARENA, , the MARENA provincial delegations, municipal government delegations, Nicaraguan universities, and other participants in geothermal activities.

MARENA employees at the provincial delegations, the mayor’s offices, private developers and other institutions will participate in training workshops on issues of environmental law and appropriate technical guidelines for mandatory environmental regulations in the development of geothermal resource projects.


68


Outputs will be obtained by uniting efforts in the various activities and tasks distributed over the five years of project implementation.

There follows a description of the main activities for each one of the outputs expected from implementation of the training component.

a. Output 1

Technical capacity is created among public sector technicians and public servants for the supervision, monitoring and environmental oversight of geothermal development projects in Nicaragua.

b. Activity R1

A1: Implement a training programme during the five-year project duration, encompassing several levels of specialisation: post-graduate, master’s programmes, technical courses, seminars, workshops and meetings.

c. Output 2

Technical capacity is strengthened among government sector employees through other training techniques and studying of issues in support of the development of geothermal projects.

d. Activity R2

A1: Implement a training project during the five-year project duration, including the exchange of experiences, memberships, etc., as techniques for the creation and building of capacity at national level.

12.2.6 Inputs

For purposes of implementing the training component, it is necessary to combine techniques leading to the creation and building of capacities at different levels of specialisation. In the first place is the participation of technicians and civil servants at high-level universities specialising in the development of geothermal production.

Secondly, the participation of technicians and civil servants in short courses, workshops, meetings, internships and exchanges of experience.


For purposes of the capacity building process, the attendance of technicians and civil servants at institutions and centres of learning specialising on the issue of geothermal development is

69


essential. Also very important for both MEM and MARENA is the holding of training seminars on specific issues such as environmental legislation and its enabling regulations. Their representatives must participate in these, together with members from their respective provincial delegations, the universities and private developers.

b. Training

The process of building capacities through specialisation at university and other levels is to take place throughout the five-year duration of the project. It is a matter of creating and building capacity not only among technicians and civil servants on an individual basis, but also of embarking upon a process of strengthening the institutions involved in said process.

c. Staff

The implementation of this project component will require both local and expatriate personnel. Participation in training processes is defined in the project activities and tasks. The technicians and civil servants who are to participate will be selected by MEM and MARENA.

d. Timetable

The project has been designed for the period from 2008 to 2012, and is thus a five-year plan. Taking this five-year plan as a point of departure, Annual Plans of Operation (APO) are to be defined in such a manner that the specific distribution and carrying out of these activities and tasks are determined for each one of the five years.

12.2.7 Training component indicators

The training component has a number of indicators that serve as one of the most important elements by which to evaluate the project, as they allow for measuring the activities and tasks carried out in an objective manner.

1. MEM implements a training programme during the five-year duration of the project, for the purpose of specialising on geothermal issues. At least three persons will receive post-graduate level and two of these will continue for a master’s degree at the United Nations University Geothermal Training Programme (UNU-GTP) in Iceland.

2. MEM and MARENA implement a training programme in short courses during the five-year duration of the project, training at least 75 civil servants on issues relevant to the different phases of development in geothermal production and its environmental monitoring.

�. During 2009 and 2010 MARENA holds meetings on environmental legislation in the territory.

4. During 2010 MARENA holds meetings on environmental aspects of geothermal projects in Central America.


70

5. MEM civil servants become members of Geothermal Resources Council (GRC); MARENA civil servants join the International Association for Impact Assessment (IAIA).

6. In 2010 MARENA and MEM civil servants area trained in Atmospheric Contaminants Dispersion Models.

7. In 2008 five MEM civil servants are trained in Geographic Information Systems (Arc View).

8. At least ten MEM and MARENA civil servants are trained in an English language courses over the project’s five-year duration.

9. Exchange of experience in El Salvador of at least 19 MARENA and MEM civil servants, as well as from other institutions involved in the follow-up, exploration and exploitation of geothermal resources during 2008.

10. Five MEM and MARENA civil servants participate in a visit to Iceland during 2009.

12.2.8 Monitoring, follow-up and evaluation

The project will organise the monitoring and its evaluation based on the logical framework matrix and the general APO for the five-year project period (see annexes 3,4,5,6).



12.2.9 Work plan

The Annual Plan of Operation must be prepared each year. It should include deadlines and persons / institutions responsible for carrying out the work proposed in each activity and task to be carried out.


The Coordination Committee is to deliver a Project Progress Report to the Steering Committee each semester, along with the APO, and the Budget Programming for the training sessions, courses, internships, etc., including the technical and financial report concerning budget execution. This is to be accompanied by another narrative report on project development, including references to

71


the timetable established for each period and forecasts regarding progress as concerns technical assistance and its results.


There are factors that may limit or hamper the success of a project. These may be internal in nature, subject to an influence that minimises its impact upon the project. But they can also be external, and beyond the will of those implementing the project. These must be taken very much into account, as they can contribute to undermine the success of the project. The factors that exert an influence upon the training component of the project titled “Iceland -- Nicaragua: Geothermal Capacity Building Project” are as follows:

Internal

• The creation of specialised capacities in the area of geothermal production and management is

not yet a priority at government agencies.

• There is a lack of definition of coordination mechanisms between governments as regards project implementation.

• Civil servants at the institutions appointed to follow up on the implementation of project activities dedicate themselves instead to other current activities that don’t allow them to carry out their follow-up obligations in a proper and timely fashion.

• Lack of motivation concerning participation by civil servants in the training to be offered in the areas mentioned above.

• Lack of motivation among civil servants as concerns improving their technical capacities, due to an already excessive workload.

• Weak definition of the expected outputs using the training tools (e.g. exchange of experience).

• The civil servants selected to participate in the exchanges of experience and internships are not the most suitable.


72

12.2.12 Budget

The implementation of the training component has a cost of seven hundred and sixty-six thousand nine hundred and forty-five US dollars (766,945.00) (see annex 4), distributed as shown in the following table:

Distribution of funds for training over five years (in %)

19.7

27.3 2721.3

4.70

5

10

15

20

25

30

2008 2009 2010 2011 2012

12.3 Component 3. Endowment of technical resources, infrastructure and equipment

12.3.1 Scope of the component for endowment with technical resources, infrastructure and equipment.

This component is aimed at the institutional strengthening of the MEM Investigation Unit and consists of the endowment with human, material and financial resources for its functioning and consolidation during the five-year duration of the project. It includes the refurbishing of the geochemical laboratory infrastructure.


It is considered that research, exploration and exploitation of geothermal resources are an area in which there is currently little experience in Nicaragua. It is therefore urgent to create and strengthen a specialised Investigation Unit at MEM. To that end it is necessary to have available national capacity that brings together the creation of specialised capacities, technical resources and infrastructure.

The current geochemical laboratory is dysfunctional and requires investment in order to reach the conditions necessary to meet the industry’s demand, but also to provide support to the MEM Geothermal Investigation Unit.

7�


The existence of the MEM Geothermal Investigation Unit and the support it will receive from the geochemical laboratory will allow for carrying out specialised research as regards the exploration, exploitation and development of geothermal production in Nicaragua. Likewise, a national capacity will be developed to offer laboratory services to the industry.

12.3.3 Objective

To provide technical resources, infrastructure and equipment to the MEM Geothermal Investigation Unit and geochemical laboratory.


The MEM Geothermal Investigation Unit and geochemical laboratory is the direct beneficiary. Indirectly, benefits will accrue to companies, industry and other institutions that demand geochemical laboratory services.


Outputs will be obtained by uniting efforts in the various activities and tasks distributed over the five years of project implementation.

There follows a description of the main activities for each one of the outputs expected from implementation of the component for endowment with technical resources, infrastructure and equipment

a. Output 1

The MEM Investigation Unit is equipped and strengthened.

b. Activities R1

A1: Define the structure and framework for financing the MEM Investigation Unit.

A2: Endow the MEM Investigation Unit with furniture and office equipment.

c. Output 2

The MEM geochemical laboratory is rebuilt and conditioned in order to supply the demand regarding the development of research in geochemistry and geothermal production in Nicaragua.

d. Activities R2

A1: Rebuild and condition the building in which the MEM geochemical laboratory is housed.


74

A2: Endow the MEM geochemical laboratory with work instruments and additional equipment.

A�: Endow the MEM geochemical laboratory with specialised human resources for its proper functioning.

12.3.6 Inputs

The endowment with human resources, materials and equipment will constitute the technical support for the functioning of the MEM Investigation Unit and geochemical laboratory.


The technical and infrastructure strengthening of the MEM Investigation Unit and geochemical laboratory implies carrying out activities to condition the offices at the Investigation Unit and the building in which the geochemical laboratory is housed. The endowment with suitable human resources ready to take on the specialised functions at both entities and perform with quality is also important.

b. Training

The training of technicians and civil servants assigned to the MEM Investigation Unit and geochemical laboratory will take place through the implementation of components 1 and 2 (technical assistance and training).

c. Staff

The implementation of this project component will require both local and expatriate personnel and consultant. The participation in training processes for the technicians working at the MEM Investigation Unit and geochemical laboratory are defined in the project activities and tasks. The technicians and civil servants that are to participate will be selected by MEM.

d. Timetable

The project has been designed for the period from 2008 to 2012, and is thus a five-year plan. Taking this five-year plan as a point of departure, Annual Plans of Operation (APO) are to be defined in such a manner that the specific distribution and carrying out of these activities and tasks are determined for each one of the five years.

12.3.7 Indicators for the component for endowment with technical resources, infrastructure and equipment.

1. The MEM Investigation Unit is set up in 2008 and functions during the project’s five-year duration, with its respective organisational structure and framework of operation.

75


2. The MEM Investigation Unit is endowed with furniture and office equipment during 2008 and 2009.

�. During 2008 the building that houses the MEM geochemical laboratory is conditioned.

4. The MEM geochemical laboratory is endowed with work instruments during 2008 and 2009.

5. Specialised human resources are brought in to ensure the proper functioning of the geochemical laboratory during 2008 and 2009.

6. The laboratory’s geochemical analysis methods are validated in 2009.

12.3.8 Monitoring, follow-up and evaluation

The project will organise the monitoring and its evaluation based on the logical framework matrix and the general APO for the five-year project period (see annexes).



12.3.9 Work plan

The Annual Plan of Operation must be prepared each year. It should include deadlines and persons / institutions responsible for carrying out the work proposed in each activity and task to be carried out.


The Coordination Committee is to deliver a Project Progress Report to the Steering Committee each semester, along with the APO, and the Budget Programming for the next semester, including the technical and financial report concerning budget execution. This is to be accompanied by another narrative report on project development, including references to the timetable established for each period and forecasts regarding progress as concerns technical assistance and its results.


There are factors that may limit or hamper the success of a project. These may be internal in nature, subject to an influence that minimises its impact upon the project. But they can also be


76

external, and beyond the will of those implementing the project. These must be taken very much into account, as they can contribute to undermine the success of the project.

The factors that exert an influence upon the component for endowment with technical resources, infrastructure and equipment of the project titled “Iceland -- Nicaragua: Geothermal Capacity Building Project” are as follows:

Internal

• The MEM fails to allocate the necessary budget for the proper functioning of the Investigation Unit.

• Persons with little or no training in geochemistry and/or analytical chemistry are working at the specialised laboratory.

• Unsuitable staff is contracted, thus hampering the proper functioning of the Investigation Unit.

External

• There is no demand from the industry for the geochemistry services offered by the laboratory.

12.3.12 Budget

The implementation of the technical resources, infrastructure and equipment component has a cost of two hundred and sixty-three thousand three hundred and twelve United States dollars (USD 26�,�12.00), (see annex 5) distributed as shown in the table below:

Distribution of funds for equipment over five years (in %)

69.8

27.9 0.8 0.8 0.8

0

10

20

30

40

50

60

70

2008 2009 2010 2011 2012

AN

NE

X 1

LOG

ICA

L F

RA

ME

WO

RK


79

ANNEX 1

Overall objectiveTo enhance the utilization of geothermal resources in Nicaragua.

Component 1To strengthen the capacity for technical and scientific supervision at the Ministry of Energy and Mines and the Ministry of Natural Resources and the Environment for the monitoring, oversight and follow-up to geothermal resources development projects in Nicaragua.

Expected results Baseline Verifiable indicators Means of verificationRisk factors

Internal External

1. AshortandmediumtermtechnicalassistanceprojectisdevelopedforthecreationofcapacitiesatMEMasregardsmonitoring,follow-upandevaluationofthemanagementanddevelopmentofgeothermalproductioninNicaragua.

ThereisonlyweakcapacityatMEMtomonitorandfollow-upongeothermaldevelopmentprocessesinNicaragua.Thusthereexistsaneedanddemandforspecialisedtechnicalassistanceintheseareas.

1.1 TheMEMdevelopscapacityover the five-year projectperiodtomonitor,followuponandevaluatetheproductionofgeothermalenergyinNicaragua.

• TermsofReferencedocumentfortechnicalassistanceactivities.

• Reportsonresultsoftechnicalassistance.

• Projectmid-termand final reports.

• WeakleadershipfromMEMintakingcontroloftheproject.

• Deficiencies in the functioningoftheproject’sSteeringCommittee.

• Weaknessindefining institutional mechanismsforoversightandfollow-uptothefunctioningoftheproject

• Anationalpoliticalcrisisleadstoasituationinwhichgovernancecollapses.

• Unfavourableclimateconditions(naturaldisasters).

• Absenceofgovernmentpoliciesthatfavourthepromotionanddevelopmentofgeothermalresources.

Limitedcapacityforthecoordination,supervision,monitoringanddevelopmentofexplorationandexploitationofgeothermalresources

1.2 During the first semesterof2008,MEMdevelopsthecapacitytoevalu-atetheMomotomboreservoir.

•EvaluationreportontheMomotomboreservoir.•Reportsonresultsoftechnicalassis-tance.•Projectmid-termreport.

1


80

ANNEX 1


Expected results Baseline Verifiable indicators Means of verificationRisk factors

Internal External

1.3 StudiesarecarriedoutbyMEMoverthefive-year project periodinordertoinvestigatethepossibilityofincreasingproductivecapacityforenergyproductionatMomotombo.

• Reportsonstudiesref.expansionofthe field and steam generation.



CoordinatingCommittee,whichmaynegativelyaffect efficient management.

• TheMEMisunabletokeepitstrainedprofessionals,duetolowsalaries.

• Absenceof(orinsufficient) initiativesasconcernsthepromotionofprojectsintendedtomakecomprehensiveuseofgeothermalresources,including

FailuretocreateaclimatefavourabletoinvestmentintheNicaraguageothermalsector.

• Absenceofanationalstrategyfordevelopinggeothermalresources.

• Absenceofaregulatoryframeworkthattransparentlydefines both publicandprivateresponsibilities.Thisisaprioritytaskfor

1.4 In2008MEMacquirestheinstitutionalcapacitytointerprettheresultsofsurfaceresearchandevaluatethedecisiontodrillwellsontheManagua-Chiltepeslope.

• ReportonsurfaceinvestigationandevaluationofwellsdrilledontheManagua-Chiltepeslope.



2


81

ANNEX 1


Expected results Baseline Verifiable indicatorsMeans of

verificationRisk factors

Internal External

1.5 MEMcorrectlyevaluatesthefinal report of theexplorationconcessiongrantedGeoNicafor2008and2009.

• Evaluationmadein the final report ref.Theexplorationconcession.



thosewithlowenthalpythatmayhaveahighsocialprofitability due to theindustrialandproductiveusestowhichsuchresourcesmaybeput.

• Difficulty on the partofIcelandicexpertstocomplywiththeirtrainingcommitmentsduetoexcessiveworkloads.

thestateinitsefforttopromotethedevelopmentofgeothermalresources.

• Absenceof(orinsufficient) incentivesthatstimulateprivatesectorparticipationingeothermalenergydevelopment.

• Failuretopromotepre-investmentintheexplorationandexploitationofhighenthalpygeothermalsources,

1.6 In2010GeoNicaisgrantedanexploitationconcessionandanenergygenerationlicense.

• DocumentsgrantingconcessionsforexplorationandagenerationlicensetoGeoNica.

• TechnicalassistancereportusedforgrantingconcessionsforexplorationandagenerationlicensetoGeoNica.



3


82

ANNEX 1




Internal External

1.7 AtprojectconclusionMEMhasacquiredthecapacitytomonitorandevaluatethedevelopmentphaseoftheGeoNicaconcession.

• Evaluationmadein the final report ref.Theexplorationconcession.



forthepurposeofexpandingthecapacityforgenerating

electricity.

1.8 AtprojectconclusionMEMevaluatestheGeoNicaplantdesignandsurfaceequipment.

• Reportonevaluationofplantdesignandsurfaceequipment.



1.9MEMhasthecapacitytosupervisewelldrillingatSanJacinto–Tizatein2008and2009.

• Reportontechnicalassistanceduringthesupervisionofdrillingthewells.


• Projectmid-termreport.

4


83

ANNEX 1




Internal External

1.10MEMcorrectlyevaluatesthemanagementoftheSanJacinto–Tizatereservoirforthedurationof the five-year project.

• Reportonevaluationofreservoirmanagement.



1.11Duringthefirst semester of2008,MEMpreparesadequatetechnicalguidelinesforsupervisionofexplorationandexploitationofgeothermalresources.

• Documentonregulationsfortheexplorationandsupervisionofgeothermalresourcesdevelopment.



1.12MEMdevelopsthecapacitytoevaluatetenderingprocessesforgeothermalconcessionsduring2008and2009.

• Reportonevaluationoftenderingprocessescarriedout.


5


84

ANNEX 1




Internal External

1.13In2008activitiesare identified that aretobecarriedoutbytheMEMResearchUnit.

• DocumentontheconceptionoftheroleandstructureasregardsfunctioningoftheResearchUnit.

• PlansforthefunctioningandactivitiesoftheResearchUnit.

• Marketstudy.• Document defining

therelationbetweentheResearchUnitandgeothermalsupervision.



1.14Researchisundertakenonmarketconditionsfortheprovisionofservicestotheindustrybythegeochemistrylaboratory,whichistobevalidatedin2009and,ifnecessary,accreditedbeforetheprojectconcludesin2012.

1.15In2008MEMdefines the relationbetweentheResearchUnitandthegeothermalsupervisionteam.

6


85

ANNEX 1




Internal External

1.16In2008MEMcompletesthereviewoftheGeothermalMasterPlan,specifyingareasinwhichprefeasibilitystudiesneedtobecompleted.

• DocumentdescribingresultsofthereviewoftheGeothermalMasterPlan.

• Reportonareasidentified as needingworkuptotheprefeasibilitylevel.



1.17Duringtheproject’s five-yearduration,MEMdevelopscapacityforcarryingouthighandlowenthalpystudiesregardinggeothermalresources.

• Documentonresultsoffeasibilitystudiesref.areaswithhighandlowenthalpygeothermalresources.



7


86

ANNEX 1




Internal External

1.18TheMEMResearchUnithasthecapacitytoprovidegeochemistryservicestotheindustry,startingin2009.

• Reportongeochemistryservicesprovidedtotheindustry.



1.19In2008and2009theMEMResearchUnitstandardisesitsmethods,processes,equipmentandhumanresources,andredefines the samplepoints.

• Documentonthereviewandupdatingofthegeochemistrydatabase.

• Documentsonthesamplingpoints.



1.20In2010and2011MEMandUNANLeóncampusidentifytheindustrialpotentialforlowenthalpygeothermalareas.

• Documentidentifyinglowenthalpyareasforavarietyofuses.


• Project final report.

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ANNEX 1




Internal External

1.21In2008and2009MEMandUNANLeóncampusidentifythepotentialfordirectuseofhighenthalpygeothermalresources.

• Reportongeochemistryservicesprovidedtotheindustry.



1.22In2008and2009MEMandUNANLeóncampussuccessfullydevelopanagriculturaluseprojectforheatpumps.

• Documentonthereviewandupdatingofthegeochemistrydatabase.

• Documentsonthesamplingpoints.



2.CapacityiscreatedatMARENAandUGA-MEMforthemonitoringandevaluationofEnvironmentalImpactStudies(EIA).

MARENAandUGA-MEMispromotingthemodernisationofitsenvironmentalman-agementsystems.Therefore,technicalassistanceisrequiredinordertoimprovethe efficiency and ef-ficacy

2.1 During the first semesterof2008MARENAandUGA-MEMpre-paretheToRsfortheenvironmen-talimpactstudiestobecarriedoutatSanJacinto–Tizate.

• DocumentwithTermsofReferencefortheEIAtobecarriedoutatSanJacintoTizate.



• MARENAleadershipprovestooweaktotakeontheproject.

• Weakinterinstitu-tionalcoordinationbetweenMEMandMARENAhampersadequatecompli-ancewithprojectactivities.

• Anationalpoliticalcrisisleadstoasituationinwhichgovernancecollapses.

• Unfavourableclimateconditions(naturaldisasters).

9


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ANNEX 1




Internal External

ofenvironmentalimpactstudies,andinparticularthosegener-atedbytheexplorationandexploitationofgeothermalresourcesinitsdifferentphases.

2.2 In2008MARENAandUGA-MEMreviewandevaluatetheEIAsatSanJacinto–Tizate,ElHoyo–MonteGalánandManagua–Chiltepe.

• TechnicalassistancereportsregardingthereviewandevaluationoftheSanJacintoTizateEIA.

• ReportsontheSanJacintoTizateEIA.

• AssessmentreportontheSanJacintoTizateEIA.



• Deficient functioning oftheprojectSteeringCommittee.

• Weaknessinthe definition ofinstitutionaloversightandfollow-upmechanismsfortheprojectCoordinatingCommittee,whichcouldundermine efficient management.

• MARENAisunabletokeepitstrainedprofessionals,duetolowsalaries.

• Absenceof(orinsufficient)

• Absenceofgovernmentpoliciesthatfavourthepromotionanddevelopmentofgeothermalresources.FailuretocreateaclimatefavourabletoinvestmentintheNicaraguageothermalsector.

• Absenceofanationalstrategyforthedevelopmentofgeothermalresources.

• Absenceofaregulatoryframeworkthattransparentlydefines both public

2.3 Duringtheperiodfrom

2009to2012theEIAs

andenvironmentalauditscarriedout

byMARENAand

MEMarefollowedup

on.

• Follow-upandauditreportsEIAsmadeatGeoNica.

• DocumentsfromtheEIAatGEONICA.



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Internal External

2.4 Between2008and2009MARENAandUGA-MEMhavedefined the methodologybywhichtoevaluatetheEIAsinordertobeabletodeterminethequalityofthereportandtheenvironmentalmonitoringplanforgeothermalprojects.

• Documentwithamethodologicaldescription.



initiativesasconcernsthepromotionofprojectsintendedtomakecomprehensiveuseofgeothermalresources,includingthosewithlowenthalpythatmayhaveahighsocialprofitability due to theindustrialandproductiveusestowhichsuchresources

andprivateresponsibilities.Thisisaprioritytaskforthestateinitsefforttopromotethedevelopmentofgeothermalresources.

• Absenceof(or

insufficient) incentivesthat

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ANNEX 1




Internal External

2.5 During the first semesterof2008MARENAandUGA-MEMconsult,prepareandpublisheadequatetechnicalguidelinesformandatoryenvironmentalregulationofgeothermalprojects.

• Documentontheconsultation,includingalistofparticipants.

• Documentwithregulations.

• Quotesofpublicationcosts.

• Contractswithpublishinghouses.

• Copiesofthemanualpublished.


maybeput.• Difficulty on the part

ofIcelandicexpertstocomplywiththeircommitmentstotheprojectduetoexcessiveworkloads.

stimulateprivatesectorparticipationingeothermalenergydevelopment.

• Failuretopromotepre-investmentintheexplorationandexploitationofhighenthalpygeothermalsources,forthepurposeofexpandingthecapacityforgeneratingelectricity.

2.6 In2008MARENAholdslocaltrainingworkshopswiththemayors’offices, MARENA territorialdelegationsandotheractorsonenvironmentalregulationsforgeothermalprojects.

• Reportsonworkshops,includingalistofparticipants.


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Internal External

2.7 MARENApublishesanddisseminatesadocumentandposterwiththestepstobetakenincarryingoutEIAs.

• Quotesofpublicationcostsandcontractswithpublishinghouses.

• Copiesofthedocumentandposter.


2.8 In2009coordinationhasbeenestablishedbetweenMARENAandtheuniversitiesregardingtheEIAs.

• MinutesofcoordinationmeetingsbetweenMARENAandtheuniversities.



2.9 In2009meetingsare

heldatMARENAon

Environmentallaws.

• Reportonmeetingsref.environmentallaws.



13


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ANNEX 1




Internal External

3.CapacityiscreatedatMARENAandUGA-MEMfortheincorporationofthesustainableuseofgeothermalresourcestotheprotectedareamanagementplans.

AtMARENAandUGA-MEMtherearespecialisedcapac-ityforfollow-upandoversightoftheexploitationofnaturalresourcesinprotect-edareas,butnotasregardsgeothermalresourcesexistingintheseparks.

3.1 In2008MARENAanUGA-MEMidentifyprotectedareaswithgeothermalpotential.

• Documentdescribingprotectedareaswithgeothermalpotentialandtheir classification asplaceswithsignificant, medium orlesserpotential.



3.2 In2008MARENAandUGA-MEMidentifyprotectedareaswithgeothermalpotentialandestablishestheir

feasibilityfordevelopment.

• Documentdescribingprotectedareaswithgeothermalfeasibility.



14


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ANNEX 1




Internal External

3.3 In2008MARENAandUGA-MEMpreparesabaselineforprotectedareaswithgeothermalpotential.

• Baselinedocumentwithadescriptionofprotectedareaswithgeothermalpotentialandtheir classification asplaceswithsignificant, medium orlesserpotential.



3.4 MARENAandUGA-MEMdevelopsthecapacitytoprotectnaturalassetsinprotectedareaswithgeothermalpotential.



15


94

ANNEX 1




Internal External

Duringtheproject’s five-yearduration,MARENAincludesamongitsmanagementplans(alreadycarriedoutorabouttobe)theuseofgeothermalresourcesatthefollowingNaturalReserves:VolcanicComplexMomotombo(includeMonte-Galán),PeninsuladeChiltepe,VolcanicComplexLasPilas–ElHoyo.

• DocumentonmanagementplanforthefollowingNaturalReserves:VolcanicComplexMomotombo(includeMonte-Galán),PeninsuladeChiltepe,VolcanicComplexLasPilas–ElHoyo.includingtheuseofgeothermalresources.

• Follow-upandevaluationreportsontheimplementationofthemanagementplanforthevolcaniccomplexes.



16


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ANNEX 1




Internal External

4.StrengthentheNationalCleanDevelopmentOffice (ONDL) atMARENAbyapplyingtheCleanDevelopmentMechanism(CDM)togeothermalprojects.

Thereisapoorlycalculatedbaselinethatmayinfactbecausinginvestorstoincurlosses.Thereisnoanalysisonthecurrentsituationofthecarbonsmarketforgeothermalprojects.

4.1 MARENAholdstwotrainingsessionsfortheONDLanUGA-MEMtechnicalstaff(onein2008,followedbyanupdatein2010),workingwithinstitutionsspecialisinginDevelopmentMechanisms,suchastheAndeanDevelopmentCentre,theBarilocheCentre,etc.

• Evaluationreportsonthetrainingheldateachofthecentres.

• Staffparticipatinginthetraining.

• Documentsonthecontentsofthetrainingsessions.



• ValidationReportpreparedbyexpertsonthemethodologydefined for the saleofcarbondioxidereductioncertificates (GEI).

• Documentdescribingthemethodologydevised.



17


96

ANNEX 1




Internal External

4.2 In2009MARENAreceivesaninternationalconsultancygearedtowardpreparingthemethodologyforthesaleofgreenhousegasemissionreductioncertificates (GEI) asanoutcomeofthegeothermalprojects.

• Consultancyreports.

• Copiesofthepracticalguideongeothermalprojectdesign.

• Didacticmaterials(brochures,posters,banners,etc.)relatedtogeothermalprojectsandtheCDMingeneral.

• QuotesonpublicationcostsandexpensesforothercommunicationtechniquesintendedtodisseminatetheinformationproducedongeothermalprojectsandCDM.


18


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ANNEX 1




Internal External

4.3 In2009MARENAandUGA-MEMpreparestheCDMmethodologyforgeothermalprojectsandsubmitsittoappraisalregardingthepossiblesaleofgreenhousegasemissionreductioncertificates.

• DocumentassessingtheCDMmethodologyforgeothermalprojectspreparedbyMARENA.



4.4 Duringtheproject’s five-yeardurationtheinformationproducedonthegeothermalprojectsandtheCDMsarepublishedanddisseminated.

• DocumentwithinformationongeothermalprojectsoperatingwithCDMs.



19


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ANNEX 1

Component 2The training component is geared toward implementing a process of institutional capacity building for purposes of follow-up, monitoring, supervision, management and environmental oversight of Nicaragua’s geothermal development projects. It is aimed essentially at civil servants.



Internal External

1.Technicalcapacityiscreatedamongpublicsectortechniciansandpublicservantsforthesupervision,monitoringandenvironmentaloversightofgeothermaldevelopmentprojectsinNicaragua.

Adequatetechnicalcapacityislackingamongtechniciansandcivilservantsatgovernmentinstitu-tionsasconcernsfol-low-up,managementanddevelopmentofgeothermalenergyproduction.

1.1 MEMimplementsatrainingprogrammeduring the five-yeardurationoftheproject,forthepurposeofspecialisingongeothermalissues.Atleasttwopersonsworkatpost-graduatelevelandtwomorestudyforamaster’sdegreeattheUnitedNationsUniversity(UNU-GTP)inIceland.

• Studyplanongeothermalissues.

• Planforshortcoursesongeothermalenergyresourcesandproduction.

• Evaluationreportsontheparticipationofcivilservantspreparedbytheentitiesteachingshortcourses.

• Reportsfromtheinstitutionsatwhichthesecivilservantsareemployed(MEM,

• Thecreationofspecialisedcapacitiesintheareaofgeothermalproductionandmanagementisnotyetapriorityatgovernmentagencies.

• Thereisalackof definition of coordination

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ANNEX 1




Internal External

Adequatetechnicalcapacityislackingamongtechniciansandcivilservantsatgovernmentinstitu-tionsasconcernstheenvironmentalmoni-toringofgeothermalenergyproductionprojects.

1.2 MEMandMARENAimplementatrainingprogrammeinshortcoursesduring the five-yeardurationoftheproject,trainingatleast75civilservantsonissuesrelevanttothedifferentphasesofdevelopmentingeothermalproductionanditsenvironmentalmonitoring.

MARENAdelegations,municipalgovernmentworkers,ENEL).


mechanismsbetweengovernmentsasregardsprojectimplementation.

• Civilservantsattheinstitutionsappointedtofollowupontheimplementationofprojectactivitiesdedicatethemselvesinsteadtoothercurrentactivitiesthatdon’tallowthemtocarryouttheirfollow-upobligationsinaproperandtimelyfashion.

1.3 During2009and2010MARENAholdsmeetingsonenvironmentallegislationintheterritory.

• Reportsonlocalmeetingsregardingenvironmentallaws.


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ANNEX 1




Internal External

1.4 During2010MARENAholdsmeetingsonenvironmentalaspectsofgeothermalprojectsinCentralAmerica.

• ReportonmeetingsregardingtheenvironmentinCentralAmerica.


1.5 MEMcivilservantsbecomemembersofGeothermalResourcesCouncil;MARENAcivilservantsjointheInternationalInstituteofEnvironmentalImpactStudies.

• MARENAreportonitsparticipationasamemberoftheseinstitutions.


1.6 In2010MARENAcivilservantsaretrainedinAtmosphericContaminantsandDispersionModels.

• Technicalassistancereportfortheintroductionofthismodel.


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ANNEX 1




Internal External

2.Technicalcapacityisstrengthenedamonggovernmentsectoremployeesthroughothertrainingtechniquesandstudyingofissuesinsupportofthedevelopmentofgeothermalprojects.

2.1 In 2008 five MEM civilservantsaretrainedinGeographicInformationSystems(ArcView).

• Reportsonthetrainingsessions.

• Workdemonstratingthepracticalapplicationofthesetechnologicaltools(maps,designs,etc.).

• Listofparticipants.

• Lackofmotivationconcerningparticipationbycivilservantsinthetrainingtobeofferedintheareasmentionedabove.

• Lackofmotivationamongcivilservantsasconcernsimprovingtheirtechnicalcapacities,duetoanalreadyexcessiveworkload.

• Weak definition of theexpectedresultsusingthetrainingtools(exchangeof

2.2 AtleasttenMEMcivilservantsaretrainedinanEnglishlanguagecoursesovertheproject’s five-year duration.

• Reportsonparticipationatthecourses.

• Listofparticipantsinthecourses.

• Capacitytocommunicateandreadingofspecialisedbibliographyongeothermalresourcesandenergyproduction.


23


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ANNEX 1




Internal External

2.3ExchangeofexperienceinElSal-vadorofatleast19MARENAandMEMcivilservants,aswellasfromotherinstitu-tionsinvolvedinthefollow-up,explorationandexploitationofgeothermalresourcesduring2008.

• Presentationofprojectactivitiesregardingtheexchangeofexperience.

• Reportsonparticipationandlessonslearned.

• Reportonthefeedbackworkshopmadetoothercivilservantsdescribingwhatwaslearned.


experienceandshortcourses).

• Thecivilservantsselectedtoparticipateintheexchangesofexperienceandshortcoursesarenotthemostsuitable.

2.4 FiveMEMandMARENAcivilservantsparticipateinshortcoursestoIcelandduring2009.

• Reportsonshortcourses.


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ANNEX 1

Component 3Endowment of technical resources, infrastructure and equipment.



Internal External

1.TheMEMResearchUnitisequippedandstrengthened.

Inordertotakeonthecommitmenttocarryoutresearchworkandotheractivitiesrelatedtothedevel-opmentofgeothermalproductioninNicara-gua,MEMrequiresinfrastructureandadequateconditionsatitsResearchUnit.

1.1TheMEMRe-searchUnitissetupin2008andfunctionsduringtheproject’sfive-year duration, withitsrespectiveorganisationalstruc-tureandframeworkofoperation.

• Planfortheconditioningofoffices and building, withtherespectivebudgets.

• Researchplans.• Documentsonthe

roleandactivitiesoftheResearchUnitandtheGeothermalSupervisionteam.


• TheMEMfailstoallocatethenecessarybudgetfortheproperfunctioningoftheResearchUnit.

• Personswithlittleornotrainingingeochemistryareworkingatthespecialisedlaboratory.

• Unsuitablestaffiscontracted,thushamperingthefunctioningoftheResearchUnit.

• Thereisnodemandfromtheindustryforthegeochemistryservicesofferedbythelaboratory.

1.2 TheMEMResearch

Unitisendowedwith

furnitureandoffice

equipmentduring2008

and2009.

25


104

ANNEX 1




Internal External

2.TheMEMgeochemistrylaboratoryisrebuiltandconditionedinordertosupplythedemandregardingthedevelopmentofresearchingeochemistryandgeothermalproductioninNicaragua.

TheMEMgeochem-istrylaboratoryisdys-functionalandthereexistsnoResearchUnit.ThusMEMlacksthecapacitytocarryoutgeochemicalre-search.

2.1 During2008thebuildingthathousestheMEMgeo-chemistrylaboratoryisconditioned.

• Plansforthefunctioningandoutreachoflaboratoryservices.

• Documentvalidatingandaccreditingthegeochemistrylaboratory.

• Marketstudyondemandfortheservicesofferedbythegeochemistrylaboratory.

• Laboratoryworkplans.

• Quotesandbudgetsfortheprocurementofspecialisedlaboratoryequipment(includingtheirdescription).

• Requestsfortheprocurementofspecialisedequipment,withtheirpertinentrationaleanduse.

2.2 TheMEMgeochemistrylaboratoryisendowedwithworkinstrumentsduring2008and2009.

2.3 Specialisedhumanresourcesarebroughtintoensuretheproperfunctioningofthegeochemistrylaboratoryduring2008and2009.

26


105

ANNEX 1




Internal External

2.4 Thelabora-tory’sgeochemicalanalysismethodsarevalidated.

• Documentdescribingthestandardisationofmethods,humanresources,processesandgeochemistrylaboratoryequipment.

27

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ANNEX 61

ANNEX 7

ICEIDA’S POLICY ANDPLAN OPERATIONS

137


PREPARATION,ImPLEmENTATION ANDmONITORINg Of PROjECTS

ICEIDA is engaged in bilateral development co-operation, particularly on the basis of international agreements between the Government of Iceland and the governments of partner countries.

The Agency’s policy in this co-operation is that the development assistance provided is based on the requirements of the partner countries and is fully in accordance with the development policies formulated by the government authorities of these countries. In accordance with this policy, ICEIDA´s development projects usually originate with requests made by the government authorities of partner countries for assistance to particular projects in sectors within which the Agency operates. The employees of ICEIDA subsequently work in close co-operation with representatives of authorities in partner countries on the formulation and implementation of the projects. In this way an attempt is made to promote joint responsibility for the strategic planning and progress of projects, to ensure that they are carried out in accordance with the policies of the authorities in the country in question and to make sure that their ownership rests, for the most part, with the partner countries. When ICEIDA is engaged in projects with parties other than the authorities, e.g. NGOs, the Agency will require the projects to be implemented with the acceptance and support, and even participation, of the government.

PROJECT IDENTIFICATION DOCUMENT

Once a request has been received and projects have been selected in consultation between ICEIDA and the partner country government authorities, their preparation begins. In the course of preparations various preliminary studies are carried out in order to obtain an indication of the need for the project, its sustainability, its potential impact on the environment, and its possible effects on different social groups in the society, e.g. the gender implication.

Such studies are especially necessary when comparatively large projects are being planned. The nature and scope of these studies depends on the size of the planned project and this forms the basis of a Project Identification Document, which is then prepared and provides a detailed description of the project and the environment in which it will be carried out. Quite often the Project Identification Document, at least in part, may be based on studies or research that other parties have carried out in the area where the proposed project is to take place. The Project Identification Document describes the project, spells out that its objectives are in accordance with official policies in the sector in question and makes sure that the project in question is placed in the context of other projects in which the authorities and other development agencies are involved in the same or related fields. Great care must be taken in the preparation of the Project Identification Document to ensure that both co-operating parties gain a good understanding of the scope of the project. The decision of the partners on whether to embark on the project rests on the Project Identification Document.


138

PROJECT DOCUMENT

A formal Project Document must be prepared before embarking on the implementation of a new project. The Project Document is prepared by the representatives of the co-operating parties, i.e. ICEIDA and the partner country government authorities, and it is based on the Project Identification Document. The agreement must be approved by the Board of Directors of ICEIDA and the government authorities of the partner country in question and the document only enters into effect when formally signed. The Project Document applies only to the project described in the document and covers the obligations described therein. If either or both parties consider it necessary to deviate from the Project Document to any extent after it has been signed, this can only be done with the full agreement of both parties. In such an event the Project Document is formally amended with the signature of both parties. The Project Document shall always take account of the following:

• Development objectives. The Project Document shall set general objectives, i.e. whether and how the project is intended to reduce poverty, promote democracy, gender equality and environmental sustainability.

• Immediate objectives. Description of the specific objectives to be reached through the implementation of the project, with as many measurable objectives as possible. The document shall state whether the project is intended to be sustainable following the withdrawal of ICEIDA’s support, or whether it is only intended for a specified time and in order to return specific, agreed results.

• Ownership. The Project Document shall provide for the direct participation of the representatives of the government authorities of the partner country, both in the overall supervision of the project and in the day-to-day management. Wherever possible, the day-to-day management shall be in the hands of the government authorities in the partner country in question or in the hands of local staff specifically employed by ICEIDA to work on the implementation of the project. The Document shall specify in detail the arrangements for the supervision and day-to-day management of the project.

• Time frame. A specific time frame shall be included for the implementation of all project components over the project period.

• Budget. The Project Document shall include itemised cost, financing and cash flow estimates for all components of the project from the time of its inception until its completion. Budgets shall be prepared in USD.

• Contractual obligations. Project Documents shall invariably contain provisions on the obligations of the contracting parties with respect to management and monitoring obligations, funding, facilities, resource contributions, reporting, access to information, tax issues relating to the purchase of resources and any other matters relating to the rights and obligations of the parties with regard to the project.

139


• Input-output. In so far as possible, the Project Document shall attempt to analyse, on the one hand, all input into the project, and on the other hand, the output anticipated from each input. This procedure facilitates the assessment of projects, both over the course of their progress and during their final evaluation, and helps to analyse the output deriving from individual input components.

• Progress reporting. The Project Document shall provide for progress reports to be prepared for each project every six months.

• Internal evaluation. The Project Document shall provide that the parties to the contract may, at their own expense, carry out an internal evaluation of the project.

• External evaluation. An agreement shall be laid down in all project documents that an evaluation by independent parties shall be carried out regularly at the expense of the project, and always before a project is completed.

PROJECT PROGRESS

Reports on the progress of all ICEIDA development projects shall be prepared by the project managers of each project at six-month intervals. Progress reports shall account for the progress of the projects in accordance with Project Document specifications. The purpose of the progress reports is to provide the contracting parties with a regular status review of the projects. The reports shall be sent both to ICEIDA headquarters and to the authorities of the partner countries in question. The reports shall be discussed at the regular meetings of the supervisory project committee of each project, which shall consist of representatives of both contracting parties.

PROJECT EVALUATION

All ICEIDA development projects are evaluated regularly and all Project Documents shall contain provisions to that effect. Either party to the Document may, at their own expense, carry out an internal evaluation of the project. If either contracting party is of the opinion that an evaluation is necessary, the other party shall be notified and is thereby placed under obligation to provide all information on the project necessary for the evaluation. If such evaluation reveals shortcomings in the project in question, or nonperformance by either party, these conclusions shall be addressed at a formal meeting of the supervisory project committee and corrective measures sought. External evaluations by independent parties shall be carried out at the expense of the project at regular, agreed intervals (e.g. every third year) and always at the end of a project. Such evaluations are intended to reveal whether the project objectives have been reached and whether specifications have been met. If such evaluations reveal that the planned objectives have not been achieved or that other Project Document specifications have not been met, the evaluators shall prepare a report on the causes of such failure and submit proposals regarding whether the situation may be rectified and if so, how. There must be at least two independent evaluators, one appointed by ICEIDA and the other appointed by the appropriate authorities in the partner country. As a rule, the evaluators appointed shall be individuals or companies with expert knowledge of the field


140

in question, in addition to knowledge or working experience from countries comparable to the country where the project is being carried out.

FINANCIAL MANAGEMENT OF PROJECTS

All ICEIDA Project Documents shall contain unequivocal provisions on the management of funds allocated to the project. This provision shall describe in detail the arrangement of the accounts, settlement, control and custody of funds. ICEIDA shall always require the financial management of all projects funded by the Agency to fulfil the requirements of an independent party qualified in financial management and handling of funds, e.g. the Auditor General.

REPORTING ON PROJECTS

Iceland’s membership of DAC will not only provide access to information, guidelines and consultation, but will also impose various obligations on ICEIDA, such as the requirement to provide information on its activities and submit reports required by DAC membership. ICEIDA intends to emphasise these tasks, to comply with the decisions of DAC in the implementation of development assistance and to take account of DAC Guidelines and DAC Good Practice Papers in the preparation and implementation of its projects.