Energy and Power

Panama energy, power, electricity and LNG projects are booming in the country


Panama is thriving. The country is riding a wave of prosperity that has seen the nation become one of Latin America’s fastest growing, at an average 8 percent annually. Even as global growth slows, Panama’s economy is projected to expand at a rate of 5.5 percent over the coming three years. Energy demand is expected to keep pace at between 4.5 - 5 percent per year. Still, the rise in energy demand must be met by new investment, supply, and infrastructure. With the country’s first natural gas power plant coming online in 2018, Panama is heading in the right direction.

Panama’s efforts to bring natural gas to the nation will finally be realized with the successful auction of 350MW in 2015. The bid round attracted 27 companies, with the winner Gas Natural Atlántico - a subsidiary of US-based AES Corporation - to begin supplying the Panamanian market by 2018. The company is sourcing its LNG from the Cameron terminal in the United States. The project, which is expected to cost $800 - 900 million, has ambitions beyond the Panamanian market. AES anticipates the new terminal will receive 15 - 16 tankers per year, with 11 to supply the Panama market and the remainder to supply the AES project in the Dominican Republic.

Multimillion-dollar investments in fossil fuel power generation, network infrastructure and renewables are in the pipeline over the coming five years. The electricity segment is set to undergo significant expansion in the coming years, with a 700-MW extension of the fossil fuel generation base under way. On the hydrocarbons front, various new terminals and special economic areas are planned. The possibility of larger vessels crossing the canal, like LNG carriers, has also generated renewed interest. The addition of power through renewables and connectivity to networks in Central America and South America could drive Panama to become an energy hub for export in the region

  • The Panama Canal expansion is complete and opened on June 26, 2016.
  • The U.S. trade lane most affected by the expansion is the East Coast U.S.-Asia trade lane because it represents the highest percentage of total cargo tonnage passing through the Canal.
  • The expansion program was designed to increase the Canal's capacity and allow for the transit of larger vessels. The expansion will allow the Canal to accommodate a higher percentage of the world's liquefied natural gas fleet, greatly shortening the distance U.S. LNG exports must travel and thereby making them more competitive in the Asian market.
  • Approximately 132,000 barrels per day (b/d) of crude oil and 882,000 b/d of other petroleum production were transported through the Canal in 2015.
  • As the shale revolution swept across the United States over the last decade and an abundance of oil and natural gas wealth built, the Canal’s expansion held great hope to again provide a critical East-West point of passage, this time for natural gas supplies – Liquefied Natural Gas (LNG) aimed at Pacific markets.
  • The Panama Canal can also play a role in the global shipping industry’s transition from fuel oil and diesel to natural gas. Canal authorities are studying the possibility of building an LNG receiving terminal both for local power generation and with the aim of bunkering to provide LNG for ship borne propulsion. The move would further entrench Panama’s role in the new LNG market, both in the region and the world.
  • The Trans-Panama Pipeline (TPP) or Trans-Isthmian Pipeline, which is situated near the Costa Rican border, is another oil transit route that reduces transportation times and costs between the Atlantic and Pacific basins. Tanker data suggests that roughly 200,000 b/d of crude oil, most of which is of Colombian and, to a lesser extent, Angolan origin, flowed through the pipeline in 2015, double the amount compared with the previous year

Panama is committed to energy integration projects that will enable increased development in the Hemisphere’s countries and improve supply security. Panama’s unique geographical location allows electrical interconnection with both Andean Community countries and Central American ones. Interconnection helps to ensure the reliability of supply, makes domestic markets more competitive, and attracts foreign investment

The country already owns one of the Latin American’s largest wind farms that was developed with a USD 300 million financing of the World Bank and opens the door for more investments in this sector, as the country has the need for more power

Panama’s energy sector has grown 5% per year on year, and energy projects under construction will add energy capacity by 16.5% by end of 2016. Its potential in term of both oil and gas transit and storage through the expanded canal, and generation and exportation of electricity is enormous

However, there are a number of challenges in the electricity sector, particularly in relation to meeting the rapidly rising domestic demand, installation of adequate transmission and new high voltage lines, and lack of long term energy policy to attract much-needed private investment. If Panama can overcome these challenges, its dream to become a regional energy hub will no doubt be realized

Investment Opportunities


Around 37 hydropower projects in Panama are in design or under construction, according to the Authority of Public Services (ASEP), as part of a push for renewable energy in the country. Of this total, 24 are located in the province of Chiriqui, with a project in Bocas del Toro, 10 in Veraguas, one in Cocle and one in Columbus.

Together, the projects total 662,145 MW, of which 394.04 MW are set to be developed in the coming years. A total of nine permanent licenses for 931.8 MW has been granted, mainly in the provinces of Cocle and Veraguas. 

When it comes to licenses for solar photovoltaic (PV) generation, there are 22 projects in the provinces of Chiriqui, Cocle, Veraguas, Panama, Los Santos and Herrera.

Panama's objective is to achieve a sustainable energy system in the country to meet its high power demand. 

ASEP has closed the period to create a National Energy Plan by 2050, after consultations with various trade bodies on what steps to follow to improve the energy situation.


Wind parks are currently planned by the following companies:

  • The company Aerogeneradores de Cerro Azul is planning the construction of a 200 MW wind farm in the coastal zone of the Colón province, in alliance with the German company WIND7AG which might include the use of the breakwater of the ACP (Panama Canal Authority) in the northern territory as location for the wind mills. The project is currently in the Environmental Impact Assessment phase.
  • The company WIND7-Central America (subsidiary of WIND7AG) is planning the construction of a 120 MW wind farm in the northern zone of Bocas del Toro province; in addition, they plan other initiatives for the development of an 80 MW wind park with the company Santa Fe Energy in the province of Veraguas. Currently, feasibility studies are carried out.
  • Testing has also begun for a 180 MW wind farm in the Azuero Peninsula zone and »La Colorada« in the Coclé province by the companies Energy Environmental Engineering 3E in partnership with the German company Plan8 GmbH.
  • Finally, the company Enrilnews currently undertakes wind measurements in Toabre for another wind project in the north of the Coclé province. This park would add 225 MW to the country’s capacity and generate 540 TWh (which will represent 9 % of country’s consumption). The project will be developed in two phases: the first one adding 150 MW and starting operation in 2010 while the second phase will add 75 MW, starting construction in 2011

Natural Gas

The economic flow that has already started with the construction of the gas plant in the province of Colon will be felt not only in the energy sector in Panama, which could become an energy generating and distribution hub in the region, but also in other productive sectors that will benefit from greater stability in energy costs and generate greater dynamism in logistics and shipping.

A lengthy report highlights the features of the AES Colón project, "which will generate 380 megawatts through three natural gas turbines -one of them steam based- for the country and will provide greater energy efficiency, because 60% of the gas or fuel will produce 100% of the generation of the service."

This project has an investment of USD 1 billion and promises to change the country’s energy matrix, and the way energy is generated and distributed in Central America.

Solar Power Plants

The Public Services Authority (ASEP) has proposed the use of solar power plants for self-consumption for houses and businesses across the country. The proposal emerged as a result of the public consultation which was carried out on the rules to generate solar power for self-consumption. Specifically, Asep is considering eliminating the ceiling and it depends on the consumption capacity of each company or home.

Panama Energy Plan 2015 – 2020

The Energy Plan 2015-2020 presented by the National Secretariat of Energy in Panama is broken down into two main parts: first, the Short-Term Operational Plan 2015-2019, where proposals for the period are detailed, and second, the National energy Scenarios Plan 2015-2020, including projections of fuel prices and other energy sources and demand estimates, expected changes in the energy matrix and the future role of private companies in the energy system.

"The Short-Term Plan 2015-2019 includes those investments and actions already committed to or to be initiated during the constitutional period. In particular, it contains those activities that must be carried out in compliance with the law, such as the investments made by Empresa de Transmisión Eléctrica SA (ETESA), which are binding once approved by the National Authority of Public Services (ASEP), as well as the most important projects scheduled to enter into operation or to start construction in the 2015-2019 period, such as incorporation of the generation plants based on natural gas and liquefied gas and the hydroelectric project Changuinola 2

The Panama-Colombia Interconnection Project

This project revived under the administration of the country’s current government will enable companies based in Panama to increase their operations, and the country to strengthen its supply.  The project will serve as a bridge for carrying electricity between the North and South of the region.

The Panamanian Government’s strategy to curb greenhouse gas emissions in the short- and medium-term as well as to combat the effects of climate change are based on promoting renewable energy use and generating savings by harnessing the available energy in the country in a rational and responsible way.  At present, the possibility is being examined of incorporating natural gas into Panama’s energy matrix, given that the surge in its output in the United States will give rise to a significant amount of traffic of methane tankers through the Canal. The country could seize on this trend to become a storage and transfer hub for liquefied natural gas and other byproducts, such as ethanol and propane.  The Panamanian energy authority is also taking steps in the area of sustainable harnessing of energy and promoting energy-efficiency through rational and efficient energy use

Ethanol and Biodiesel

Panama has developed a national policy on biofuels. These laws establish the country’s national policy to promote, encourage, and develop the production and use of biofuels as well as the generation and cogeneration electricity from local biomass.

Several companies have already taken advantage of Panama’s biofuels potential such as the company Texas BioDiesel Corporation, dedicated to the production of biodiesel using up-to-date modern technology to install a refinery in Puerto Armuelles, Panama.

The strong economic growth of Panama will continue creating business opportunities in the energy sector. Those opportunities identified are likely to be found in renewable energy plants (wind/solar/gas); energy efficiency and storage; transmission lines and substations; consulting services and infrastructure; equipment and technology supply


In brief, Panama has a multimodal services platform that allow for its positioning with respect to other destinations in Latin America and the Caribbean, supported by a solid financial system that allows the mobility of capital from and to abroad, as well as air, surface, maritime and rail connectivity.

Investors have the following factors in mind when thinking to invest in Panama:

  • Location
  • Monetary Stability
  • Solid Banking System
  • Circulating Capital and access to financing
  • Legal Stability and oriented towards the development and promotion of the investment
  • Economic strength of the country
  • Country with a positive risk perspective
  • Access to logistic services adequate to your needs and with international projection
  • Access to special economic zones with incentives that you will need
  • Technological connectivity
  • Stable climate and low accident rate
  • Growing city and with development of new infrastructures and facilities
  • Access to basic services that improve the quality of life
  • Qualified labor forc


Tax exemptions and other benefits have been established for biofuel investment projects, such as an incentive equal to 20 percent of value of the acquired material for a period of five years from the commencement of production. The tax incentive will be processed, as dictated in the same article, as established by Law 76 of 2009, relating to the Industrial Development Certificate. Additionally, the purchase of bio-ethanol and biodiesel as alternative fuels will generate a tax credit of 60 cents per gallon for companies investing in the technology and will offset the payment of the excise tax on fuel and other petroleum products. This credit is not transferable.

In addition, solar and wind plants projects are exempt from import taxes, duties, levies and other charges, as well as the tax for transfer of tangible property, among others

Electricity Generation  Incentives


Mini-Hydro (10mw)

Small Hydro


Hydro (20mw-above)




Biofuel and Biomass

Income Tax

5% discount on income tax for facilities developed for public domain

5% discount on income tax for facilities developed for public domain

5% discount on income tax for facilities developed for public domain

5% discount on income tax for facilities developed for public domain

5% discount on income tax for facilities developed for public domain

5% discount on income tax for facilities developed for public domain

10 years full exemption including carbon credits income

Municipal tax







10 years full exemption

Import duties

Full exemption

Full exemption

Full exemption

Full exemption

Full exemption

Full exemption

10 years full exemption


Full exemption

Full exemption

Full exemption

Full exemption for  a list of specific equiments

Full exemption


10 years full exemption

Special Incentives

 Allowed to perfom direct purchase agrement with distibutors

No distribution or transmission  fees for direct sales or spot market for the initial 10mw

Tax incentive for reduction of CO2 emission              **Additional comments below

Allowed to apply expedite devaluation method for Solar generation equiments

Allowed to apply expedite devaluation method for wind generation equiments

Allowed to apply expedite devaluation method for GN generation equiments

10 years exemption of  distribution or transmission  fees for  spot market trading

Special Incentives

No distribution or transmission  fees for direct sales or spot market

Tax incentive for reduction of CO2 emission                            **Additional comments below


Tax incentive for reduction of CO2 emission                            **Additional comments below

No distribution or transmission  fees for direct sales or spot market

Manufacturers: 20 years income tax exception

Commercia license fees exemption

Special Incentives

Tax incentive for reduction of CO2 emission   **Additional comments below




Tax incentive for reduction of CO2 emission   **Additional comments below


10 years exemption National Public Service Authority supervision fees

Special Incentives





Manufacturers: 15 years income tax exception


5 years incentive of the 20% for raw material obtained and processed in Panamanian territory. The incentive will be processed in accordance to the rules of Industrial Promotion Certificate

Special Incentives





Distributor: VAT and import duty exemption



Disclaimer: This chart does not constitute a legal opinion or statement as it has only been created for informative purpose. The interpretation and/or procurement of any right or incentive stated in this document will be subject to the procedures and regulations of  the governmental office in charge of providing such incentives.

A shift to natural gas is just one part of the greater energy picture. To bolster energy security, Panama must improve its energy efficiency, including through interconnection with Colombia and greater market integration with the rest of Central America. An increase in non-conventional renewables and innovative technologies such as deep- water cooling will also be necessary going forward.

With the Panama Canal expansion project nearing completion, the nation has positioned itself at the center of an evolving global LNG market. The economic potential is clear. Now Panama must ensure that its energy sector growth can be as sustained.

In addition, other investment opportunities that can be explored are:

  • We have a few hydroelectric projects for sale.
  • New opportunities for hydro and wind power.
  • Brand new opportunities for bunker tank farms.
  • Possible large refinery

If you want to Set up a Business or Acquire existing Energy projects, the BusinessPanama Group together with Pardini & Asociados, an international law firm with 35 years of experience, provide a convenient One Stop Shop offering the following services.

We can help you with:

  • Setting up or acquiring the business
  • Locating office and living premises for the company and its executives
  • Forming a company, llc or branch
  • Legal services for setting up all operations, contracts, permits, etc.
  • Accessing special tax incentives
  • Applying for visas, work and residence permits for expats
  • Relocation services
  • Others

For more information, please contact us.

Read more »


Join to our mailing list to receive our latest news, properties and tips to do Business in Panama

Subscribe in our website

Download our Guide to Doing Business in Panama completely FREE

Get it Now!