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Israel Corp. Seeks $750 Million for Peru Power Plant

Israel Corp., a holding company with stakes in energy and chemicals, said it aims to obtain $750 million in loans next year for a 400-megawatt hydroelectric project in Peru to meet surging power demand.

Kallpa Generacion SA, the largest gas-fired electricity generator in Peru, plans to build the Cerro del Aguila plant in the central highlands by 2015, Javier Garcia Burgos, who heads Israel’s unit, said in an interview in Lima yesterday. The World Bank’s International Finance Corp., the Inter-American Development Bank and Caracas-based Corporacion Andina de Fomento may provide the project’s “core financing,” he said.

“We’ve already tapped the bond market, so if they provide any sources of funds it will be marginal,” said Garcia Burgos, 40. “Because of the large amount of cash required, it looks more like a multilateral or credit financing deal.”

The expansion is part of $10 billion in energy investments expected by Peru’s Energy Ministry, which seeks to double electricity generation to 10,000 megawatts by 2021 to meet rising demand. Peru’s power demand may grow 8 percent annually over the next five years driven by new copper mines, as well as gas and petrochemical projects, Garcia Burgos said.

Lima-based Kallpa is also working on a $400 million upgrade of its 570-megawatt Chilca plant that will expand capacity by 50 percent, he said. The unit, which is 25 percent-owned by Lima-based chemical producer Quimica del Pacifico SA, has raised $477 million on capital markets since 2006.

Gas Contracts

Kallpa lined up sufficient natural-gas supply for its plant from a Pluspetrol SA-led group, said Garcia Burgos, a San Diego State University graduate. Charlotte, North Carolina-based Duke Energy Corp. has yet to arrange gas supply for its $100 million, 192 megawatt power plant inaugurated in May, while Ashmore Energy International Ltd. shelved plant plans because of a lack of gas.

Kallpa, whose 30 clients include Freeport-McMoran Copper & Gold Inc.’s Cerro Verde copper mine and electricity distributors Luz del Sur SAA and Edelnor SA, has pre-sold power from its Chilca plant expansion, Garcia Burgos said. The expansion was financed by a $172 million bond sale and a $105 million syndicated loan led by Bank of Nova Scotia.

Israel Corp., which acquired units in six Latin American countries from CDC Globeleq in 2007, will continue to operate its 220-megawatt Cia. Boliviana de Energia Electrica SA unit even as Bolivian President Evo Morales nationalizes power plants owned by GDF Suez SA and Rurelec Plc.

“Bolivia is the most difficult country we operate in,” said Garcia Burgos. “But our unit has been private for 85 years, so we don’t expect the government to attempt nationalization.”

Israel Corp. rose 2 percent to 2,500 shekels today in Tel Aviv.

Download: Kallpa's Burgos Interview About Peru Hydo-Electric Plant

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