Latin Finance - June 2008 - 38

peru electricity finance and mines minster Juan Valdivia claims his country has the capacity to produce 60,000 megawatts from hydro plants, more than 10 times current production. The focus is on the eastern slopes of the Andes Mountains that flow into the Amazon basin. Gamio says Brazilian companies – the ministry is careful not to mention any names – are keenly interested in energy generation and predicts the construction of at least two super hydroelectric plants, each producing about 1,000 megawatts, in the next five years. In the meantime, one hydro facility, the 220 megawatt El Platanal, will be finished in 2009 and two others – Santa Rita and Quitaracsa – should be done by 2011. They are all on the Pacific side of the Andes. El Platanal, being funded and built by Peru’s Cementos Lima will cost $210 million, slightly less than the regional standard of $1 million per megawatt. While the government is pushing hydroelectric generation, investors are plowing their money into thermal plants. The math is simple. Natural gas in Peru costs $2.12 per million BTU. It is set to rise to $2.20, but this is still less than one-third the regional average of approximately $7. A megawatt of energy in Peru sells for $44, about $20 less than in Chile and Brazil. “Investors are obviously looking at generation using natural gas. The price of gas is very competitive, much lower than the regional average, and thermal plants can be built faster and with less investment than hydroelectric plants,” says Mile Cacic, head of Luz del Sur, the principal electricity company for Lima. New Projects Stack Up Two companies – Enersur, owned by Franco-Belgian Suez, and Israeli-owned Inkia Energy, operating thermal plants in Chilca – use gas from the Camisea gas fields. Enersur generates 350 megawatts and is adding a third turbine, while Inkia is producing 184 megawatts and already building to double production. Panama’s Lakas Group has started construction on what will eventually be a 596 megawatt plant. The first turbine should be in place by August. There is talk that Houston-based AEI – which has a stake in Luz del Sur – could buy out or partner with Lakas. US-based Duke Energy owns land in Chilca and has started public hearings to construct a 197 megawatt plant. Stateowned Electroperú, the country’s principal energy generator, meanwhile plans to diversify into natural gas by building a 190 megawatt plant in Chilca. The overall plan is for a complex capable of producing up to 390 megawatts that would cost around $360 million. “We are planning an open cycle plant with two turbines that will be installed in succession. Eventual production could be between 340 and 390 megawatts, depending on the company chosen to manufacture the turbines,” says Electroperú chief César Butrón. Electroperú is studying proposals from Siemens and General Electric. Initial investment will be around $180 million. There are two other possible plants in Chilca. Provisional concessions have been granted to Peruvian firms, Holek Energía and Lennox Energética, which are looking for around $500 million in financing each. They plan to install 600 megawatt thermal plants. Two other plants in Lima, controlled by Spain’s Endesa, produce electricity using natural gas, and there are projects underway on the northern coast to use natural gas discovered in offshore blocks. Peru has the fifth largest natural gas reserves in the region, according to the minister of energy and mines, at 16 trillion cubic feet, enough for 25 years of domestic use and exports. There are more than 80 hydrocarbon blocks under concession and significant reserves are expected to be found, particularly in three lots surrounding the Camisea gas fields that hold most of the deposits already identified. Perupetro, the state agency that promotes hydrocarbon investment, is offering another 17 lots in a bidding round expected for the fourth quarter. moved quickly to deal with it,” says Roque Benavides, a director of the business umbrella organization, CONFIEP, and CEO of Minas Buenaventura. Privatization agency ProInversión has awarded 30-year concessions for three new power lines. The first went to Spain’s Abengoa, which will invest $106 million in a 700 kilometer line from generating plants in central Peru to the northern coast. Two more lines were awarded to Isonor Transmisión, a Spanish consortium. It will build a 760 kilometer pipe from the center to the south of Peru, as well as a 200 kilometer line from Machu Picchu power station to Cotaruse, in neighboring Apurimac region. Total investment for the 30-year concession is expected to be more than $300 million. A final transmission line, from new power plants in Chilca to Lima’s northern district of Zapallal, will be offered by ProInversión in the third quarter. This channel is necessary if projects under construction and planned can actually connect to the country’s energy grid. The existing power line is saturated. Fuelling Exports to Brazil The vast number of potential projects could produce much more energy than Peru actually needs, which is something the government also desires. The goal is not only to meet domestic demand, but also to export electricity to neighboring countries. Peru and its neighbors, with the exception of Brazil, have been meeting regularly on energy interconnection. The UN Development Program is financing a feasibility study for energy integration in Bolivia, Chile, Colombia, Ecuador and Peru. Colombia and Ecuador are linked, while a transmission line joins Peru to Ecuador. “Energy integration is one of the most important aspects for the region. It will improve the performance and efficiency of the sector,” says Ariela Ruiz, an energy consultant to the UN Economic Commission for LatAm and the Caribbean. Although not part of the UN study, Brazil is also a major target. Gamio envisions five 1,000 megawatt hydro plants built with Brazilian capital, implying about $5 billion in investment. This could be transmitted over new power lines into the Brazilian energy grid. “We have the potential to meet Brazil’s needs,” says Gamio. LF Facilitating Transmission The government is also working furiously to attract investment in energy transmission to resolve a potentially huge problem. “The bottleneck in the energy sector is the lack of transmission lines, but the administration recognized this and has 38 LATINFINANCE June 2008

Latin Finance - June 2008

Table of Contents for the Digital Edition of Latin Finance - June 2008

Latin Finance - June 2008
Contents
CEO of the Year
Who Said That?
Cutting Edge Corporates
JBS-FRIBOI
Ecopetrol
Brazilian Steel
Financing Petrobras
Punta Colonet
Mexican Afores
Peru Electricity
Corporate Governance
Guide to Treasury & Cash Management
Parting Shot
Latin Finance - June 2008 - Latin Finance - June 2008
Latin Finance - June 2008 - Cover2
Latin Finance - June 2008 - Contents
Latin Finance - June 2008 - 2
Latin Finance - June 2008 - 3
Latin Finance - June 2008 - 4
Latin Finance - June 2008 - 5
Latin Finance - June 2008 - 6
Latin Finance - June 2008 - 7
Latin Finance - June 2008 - 8
Latin Finance - June 2008 - 9
Latin Finance - June 2008 - 10
Latin Finance - June 2008 - 11
Latin Finance - June 2008 - 12
Latin Finance - June 2008 - CEO of the Year
Latin Finance - June 2008 - Who Said That?
Latin Finance - June 2008 - 15
Latin Finance - June 2008 - 16
Latin Finance - June 2008 - Cutting Edge Corporates
Latin Finance - June 2008 - 18
Latin Finance - June 2008 - 19
Latin Finance - June 2008 - 20
Latin Finance - June 2008 - JBS-FRIBOI
Latin Finance - June 2008 - 22
Latin Finance - June 2008 - Ecopetrol
Latin Finance - June 2008 - 24
Latin Finance - June 2008 - Brazilian Steel
Latin Finance - June 2008 - 26
Latin Finance - June 2008 - 27
Latin Finance - June 2008 - Financing Petrobras
Latin Finance - June 2008 - 29
Latin Finance - June 2008 - Punta Colonet
Latin Finance - June 2008 - 31
Latin Finance - June 2008 - Mexican Afores
Latin Finance - June 2008 - 33
Latin Finance - June 2008 - 34
Latin Finance - June 2008 - 35
Latin Finance - June 2008 - 36
Latin Finance - June 2008 - Peru Electricity
Latin Finance - June 2008 - 38
Latin Finance - June 2008 - 39
Latin Finance - June 2008 - Corporate Governance
Latin Finance - June 2008 - 41
Latin Finance - June 2008 - 42
Latin Finance - June 2008 - 43
Latin Finance - June 2008 - 44
Latin Finance - June 2008 - 45
Latin Finance - June 2008 - Guide to Treasury & Cash Management
Latin Finance - June 2008 - 47
Latin Finance - June 2008 - 48
Latin Finance - June 2008 - 49
Latin Finance - June 2008 - 50
Latin Finance - June 2008 - 51
Latin Finance - June 2008 - 52
Latin Finance - June 2008 - 53
Latin Finance - June 2008 - 54
Latin Finance - June 2008 - 55
Latin Finance - June 2008 - Parting Shot
Latin Finance - June 2008 - Cover3
Latin Finance - June 2008 - Cover4
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