The hydroelectric concession — in the words of the law, the authorization to use State-owned assets for electricity generation — is the MEM permit that lets an investor build a plant on a public-domain river. This guide covers what the General Electricity Law (Decree 93-96, the LGE) and its regulation (Government Agreement 256-97) actually require, the statutory procedure and deadlines, the environmental assessment, the Decree 52-2003 tax incentives, and the sanctions regime.

Quick summary: A MEM authorization is needed to use State assets when a plant exceeds 5 MW (LGE Art. 8). It is granted by ministerial agreement for up to 50 years, without exclusivity (Art. 13). The application goes in a sealed envelope (plica) with an environmental impact assessment attached (Art. 10, 14). MEM must resolve within 90 days (Art. 8). Renewable projects get 10 years of ISR exemption from commercial operation and import-duty and IVA exemption on equipment (Decree 52-2003, Art. 5).

What the authorization is

The General Electricity Law (Decree 93-96) sets the rules:

  • Installing generating plants is free (Art. 8) — no government authorization is needed, with no limits other than environmental protection and the protection of people, their rights and property.
  • Using State-owned assets for generation requires a MEM authorization when the plant exceeds 5 MW (Art. 8). The authorization lets the holder use public-domain assets; it is granted by ministerial agreement, for no more than 50 years, and is not exclusive — third parties can compete in the same service (Art. 13).
  • Geothermal resources get the same treatment as the authorization to use public-domain assets (Art. 9).
  • Temporary authorization for studies: to carry out studies, surveys and measurements on public or private land, MEM can grant a temporary authorization for up to one year; the holder compensates owners for any damage (Art. 11).
  • Shared water: where a hydro resource is shared with other uses, or two projects use the same river, the holder must ensure it does not affect the permanent exercise of other rights (Art. 12).

Who runs the market

The Wholesale Market Administrator (AMM) is a private non-profit entity that coordinates the operation of generating plants, international interconnections and transmission lines, within free contracting between generators, traders, large users and distributors; it sets short-term market prices for transfers not covered by long-term contracts (LGE Art. 44). A large user is a consumer whose demand exceeds 100 kW, with freely agreed supply terms (Regulation, definitions).

Requirements

The application for a definitive authorization for a hydroelectric or geothermal plant is filed with MEM, original and copy, on MEM’s forms, and must contain at least (Regulation, Art. 4):

  • Identification of the applicant — for a legal person: the legal representative’s details, the company’s name, domicile, and a legalized copy of its incorporation deed and amendments
  • Domicile and place for notifications
  • Description and general plans of the project, at the scale MEM sets
  • Works schedule and project budget
  • Map of the area affected by the works
  • Public and private assets to be used, identifying owners with whom no purchase or easement agreement has been reached, and where they can be notified
  • Environmental impact assessment study, approved by the environmental authority
  • Electrical studies of the impact on the transmission system for plants over 5 MW, under the CNEE’s access-study rules (NEAST); load-flow studies only for 5 MW or less
  • Safety plans under the CNEE’s rules
  • For hydro and geothermal plants, plans for exploration, development and exploitation of the resource

MEM can ask for more information; that period cannot extend the legal deadlines beyond the time the applicant takes to answer (Art. 4).

Environmental assessment

Generation projects must attach an environmental impact assessment (LGE Art. 10). The Environment Law (Decree 68-86, Art. 8) requires an approved environmental impact study, before development, for any project that may harm natural resources or the environment. See the MARN hub for environmental licences.

Step by Step

1. Temporary authorization for studies (optional)

To study a site — surveys, soundings, measurements — apply for a temporary authorization of up to one year (LGE Art. 11; application contents in Regulation Art. 6). It does not stop another party from requesting a temporary authorization for the same area.

2. Environmental impact assessment

Prepare the environmental impact study and obtain its approval (LGE Art. 10; Decree 68-86, Art. 8). The approved study is part of the application (Regulation, Art. 4 i).

3. File the application in a sealed envelope (plica)

File the application with MEM in a plica (sealed envelope), with all the information the regulation requires, including the easements to be imposed on public or private land. A document with the general details of the application goes with the plica (LGE Art. 14).

4. Publication and objections

Within 15 business days of filing, MEM publishes the general details once, at the applicant’s cost, in the Diario de Centro América and another major newspaper. Within 8 days of the last publication, anyone with an objection — or anyone who wants to apply for the same project — must say so in writing; a competing applicant then has 30 days to file a formal application (Art. 15). If others apply, MEM holds a competition to choose the holder (Regulation, Art. 5).

5. Opening of the plicas and resolution

Within 15 days after those periods end, MEM opens the plicas in a public act (Art. 16), and must issue a reasoned resolution within 60 days of the opening (Art. 17). Overall, MEM must resolve within 90 days of the application (Art. 8).

6. Ministerial agreement and contract

A positive resolution is set out in a ministerial agreement published in the Diario de Centro América within 15 days; it states the rights and obligations, conditions, start and completion dates of the works, easements, sanctions and grounds for termination (Art. 18). Within 30 days of that publication, MEM and the holder sign the contract in a public deed (Art. 19). If the deed is not signed in time for reasons attributable to the holder, the ministerial agreement lapses (Art. 21). The authorization contract sets the holder’s obligations, guarantees, duration and the procedures to rescind, enlarge or extend it (Regulation, Art. 5).

StepDeadlineLegal basis
Temporary authorization for studiesUp to 1 yearLGE Art. 11
Publication of the applicationWithin 15 business days of filingLGE Art. 15
Objections / competing applications8 days after the last publicationLGE Art. 15
Formal competing application30 daysLGE Art. 15
Public opening of plicasWithin 15 days after those periodsLGE Art. 16
MEM resolutionWithin 60 days of the openingLGE Art. 17
Overall deadline to resolve90 days from the applicationLGE Art. 8
Ministerial agreement publishedWithin 15 daysLGE Art. 18
Contract in public deedWithin 30 days of publicationLGE Art. 19
Authorization termUp to 50 yearsLGE Art. 13

Tax incentives for renewables (Decree 52-2003)

Municipalities, INDE, mixed companies and individuals or companies carrying out renewable energy projects get (Art. 5):

  • Import duties and IVA: exemption on machinery and equipment used only for generation in the project area, during the pre-investment and construction periods (no more than 10 years). The exemption is requested from the SAT before each import.
  • Income Tax (ISR): exemption for 10 years from the start of commercial operation (FIE), only for the part that corresponds to the project.
  • IEMA: exemption for 10 years from the FIE.

To use them, the application goes to MEM with the project’s schedule and a statement of compliance with the General Electricity Law (Art. 5). Renewable resources include solar, wind, hydro, geothermal, biomass, tidal energy and others MEM qualifies (Art. 4).

Sanctions

The CNEE fines any breach of the General Electricity Law. Fines are expressed in kWh at the energy-component tariff for a residential customer in Guatemala City: 10,000 to 1,000,000 kWh for generators, transmitters and distributors, depending on the seriousness of the breach. Each day the offender fails to comply after a CNEE order counts as a separate offence (LGE Art. 80). Fines can be challenged in the ordinary courts (Art. 81).