AES Gener SA is betting it can overcome opposition that has stalled rival power projects in Chile to build $3.5 billion of new plants needed to help the world’s largest copper-producing country develop new mines.
While electricity supply in Chile is secure for now, the company’s pipeline of projects won’t be enough to stave off a looming power crunch, Chief Executive Officer Felipe Ceron said. Plant shutdowns and a fourth year of drought are already pushing up power prices for mining companies and residents.
“We are the only company building base generation projects in the country,” Ceron said in an interview from his Santiago offices yesterday. “Unfortunately, there are some opposition and pending lawsuits but we think they’ll get resolved and we’ll proceed with construction.”
Chile’s energy shortage, exacerbated by greater public scrutiny of environment impact, will become “critical” in the medium term if new generation projects aren’t developed, according to the manifesto of President Michelle Bachelet who took power March 11. Energy Minister Maximo Pacheco, a former executive of state-owned copper miner Codelco, intends to devise a new energy plan within the first 100 days in office.
The new government will revise plans to give approval to Empresa Nacional de Electricidad SA and Colbun SA to build the HidroAysen hydroelectric dam in Patagonia, a project that would supply more than 2,000 megawatts of power to Chile’s central grid. Environmentalists say the project will cause irreversible damage to the Baker and Pascua rivers. Pacheco said earlier this month that HidroAysen isn’t viable in its current form.
The brokerage arm of Grupo de Inversiones Suramericana increased the weighting of AES Gener in its Chilean stock recommendations and reduced Endesa, analysts said in a note to clients dated yesterday, citing the suspension of one of the latter’s plants. AES Gener shares rose 1.1 percent to 297.5 pesos at 2:29 p.m. while Chile’s IPSA index was little changed.
AES Gener’s $2.1 billion Alto Maipo project near Santiago shouldn’t be derailed by environmental opposition because the run-of-the-river plant doesn’t require flooding and will make power supplies to the capital more secure, Ceron said.
Chile needs to balance the need for high environmental standards with the necessity to add more power to the grid to ensure the country’s development, he said.
The unit of Arlington, Virginia-based AES Corp. and London-listed miner Antofagasta Plc (ANTO), a 40 percent partner in Alto Maipo, secured $1.2 billion project financing in December to develop Alto Maipo. The partners are on schedule to start generating by the end of 2017 or early 2018, Ceron said.
During the previous government of Sebastian Pinera, community and environmental groups blocked energy projects by obtaining legal injunctions.
Opposition groups stalled Endesa’s Punta Alcalde coal-fired project in central-northern Chile and a similar project proposed on the northern coast by Brazilian entrepreneur Eike Batista’s MPX Energia SA. In August 2010, Pinera requested France’s GDF Suez to find a new location for its planned 540-megawatt Barrancones project. A court ordered Endesa to suspend its Bocamina II coal-fired plant on Dec. 17.
The impediments to new generation projects are “worrying,” Ceron said. The new government is focused on promoting investment and AES Gener is open to cooperating to make the industry more efficient and competitive, he said
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