The generation of energy in Costa Rica is a State monopoly where only the Instituto Costarricense de Electricidad (ICE) is authorized to produce and distribute energy.

On September 28^th, 1990, Law number 7200 "Authorization of Autonomous or Parallel Electric Generation Act " herein after "The Law" was approved for the regulation of private generation of electricity that could be sold to ICE. Later in 1995, Law 7508 was approved to make private generation more appealing to potential foreign investors wanting to generate power in Costa Rica.

ICE Electricidad (ICELEC) regulates the permission of "THE LAW" to produce and sell electricity to ICE via concessions to the private generators. ICELEC is also in charge of assigning these "concessions" to the interested private parties needed for the approval of private generation of electricity.

Provided that a concession is granted, the "THE LAW" features the following possibilities for the private generation of energy in Costa Rica:

• Private entities can build energy generation plants that do not exceed a 20.000Kw. capacity.

• The shares of the private company that is going to sell their energy to ICE must be made up of at least 35% of Costa Rican capital.

• "THE LAW" states that the only plants that will be allowed to sell their energy to ICE are the plants that produce their energy by non-conventional methods of production. What this means is that plants that produce their energy through oil, coal or water (hydro-electric not included) as basic elements will not be welcomed.

• Concessions may be granted for up to 20 years. This term may be extended with approval by the ICELEC. (It is important to note that ICELEC may modify some of the terms of the concession renewal and that transfer of the concession is possible with permission of ICELEC.)

• An Environmental Impact Assessment must be submitted to the Ministry of Natural Resources, Energy and Mining prior to the application for the concession. This report must be approved for ICELEC to begin processing the concession application.

• "THE LAW" establishes that to guarantee the fulfillment of the control program and environmental recovery, the licensee must, at the time of signing the contract, give an unconditional guarantee of compliance in favor of the Costa Rican Environmental Department. The Guarantee will be an amount equivalent to (4%) of the value of the project, during the building of the plant and will be effective for one year after initiating the operation of the project. After one year the guarantee will be reduced to an amount equivalent to (1%) of the value of the project.

• Private generation of energy is restricted to 15% of the total output of all the energy plants conforming the national electric system. ICE may increase this total by public biding the purchase of 15% more of energy, with a 50.000Kw. maximum capacity.

• The rates that ICE buys the energy from the private generators may be subject to periodic adjustment based on local economic factors and trends.

There are other benefits provided to private generators of energy in Costa Rica and they are the following:

Public Bids:

The new amendments to the LAW authorize public bids as another form of contracting with ICE. The bid contracts for the generation of energy uses the Build, Operate and Transfer (BOT) system.

The first BOT project concession for geothermal generation was recently granted. The Project belongs to Geoenergía de Guanacaste Ltda. The new plant will be located in the north pacific coast of Guanacaste and will produce 27 megabytes.

Geoenergía de Guanacaste Ltda will explore the generation plant for 15 years by selling energy to ICE. At the end of the program the generation plant will be transferred to ICE.