Chile and China

Snapshot: China’s involvement in the Chilean power sector

Bnamericas Published: Friday, January 20, 2023
Snapshot: China’s involvement in the Chilean power sector

China is steadily expanding its footprint in Chile’s electricity sector – a trend that is likely to continue.

With bipartisan support for renewables, decarbonization goals and openness to foreign investors, Chile has proven to be a target for the Asian powerhouse. China is also Chile’s biggest trading partner.

Overall in Latin America, China has been adopting an increasingly strategic approach, focusing on boosting its presence in growth sectors including energy and technology. 

The year 2016 constitutes a milestone in the Chile-China energy investment sphere. State Power Investment Corporation acquired the global assets – including those in Chile – of Australian clean energy developer Pacific Hydro for around US$3.00bn, which also opened the door for project financing provision. 

In another incursion that year, solar panel manufacturer Trina Solar, present in Chile since 2013, and Spanish developer Grenergy Renovables announced a Chile-focused project partnership deal. 

“Since then, mergers and acquisitions, greenfield projects and provision of equipment has only intensified,” Ignacio Tornero (in photo), founder-CEO of Santiago-based business and legal consulting firm East Consulting, told BNamericas.

“In the coming years we expect that Chinese companies will continue actively participating in the Chilean electricity market, above all, via auctions and greenfield developments as well as provision of technological equipment.”

JinkoSolar is another panel manufacturer riding the Chilean wave, powered on by a government-mandated clean energy goal that has already been surpassed and in the process of being updated. Against this backdrop, in a 2022 power supply auction, Zapaleri, a local unit of Chinese-North American led Canadian Solar, won a contract for 253MWp solar PV-storage project Zaldivar. 

China, and more specifically state-owned firms, has spent billions of dollars to obtain grid assets in Chile, a country that takes a relatively pragmatic and neutral stance in terms of investment partners. In 2018, China Southern Power Grid International paid US$1.3bn for 28% of transmission firm Transelec, while a year later State Grid Corporation of China handed over US$2.23bn for distributor Chilquinta Energía. Then in 2020, State Grid acquired distributor CGE for US$3bn.

Complying with antitrust regulation in Chile, the national economic prosecutor (FNE) conducted an analysis of Chinese M&A moves. The conclusion in the acquisitions reviewed, Tornero said, was that all firms owned and under the supervision of the state-owned Assets Supervision and Administration Commission of the State Council (SASAC) are deemed related, according to Chilean law.

Chinese companies, among other generation and grid maneuvers, have also obtained distributed generation assets, according to data from Spain-headquartered research firm TTR. The buyer, TTR said in a report compiled for BNamericas, was Sungrow Power Chile, a local unit of energy transition technology firm Sungrow Power Supply

In another transaction, developer China International Water & Electric Corporation acquired in 2017 Brazilian renewables firm Atiaia Energia, whose portfolio included 90MW Chilean run-of-the-river hydropower project Rucalhue, which has an environmental license but has stalled amid local opposition over its potential impact.

In parallel, China has been consolidating its role as component provider. Among the latest deals, wind turbine manufacturer Goldwind and Sungrow secured business from generator Engie Energía Chile, which purchased from them turbines for its 342MW Lomas de Taltal wind park and batteries with associated capacity of 638MWh for its 180MW Coya solar farm.

Goldwind, formerly state owned, has worked with developers Enel Green Power and Mainstream Renewable Power, said Tornero (pictured), who is also affiliate professor at the Center for International Studies of Universidad Católica and a member of its Center for Asian Studies. 

Tornero highlighted that Transelec and Southern Power Grid, along with Colombia’s ISA, form part of consortium Yallique, awarded a contract to build and operate a 1,500km HVDC line – Kimal-Lo Aguirre – that is vital to decongest power dispatch from Chile’s sundrenched north.

Among other initiatives in the local construction space, China, via EPC firm PowerChina Chile, is also involved in diesel backup and solar projects 200MW Cala Morritos and 480MW CEME1, respectively.   

Elsewhere on the wider electric power map, Chinese electric bus manufacturers Foton and BYD have a foothold in Chile and the latter company recently told BNamericas it was also eyeing opportunities in the electric passenger vehicle, lithium cathode and energy storage spaces. BYD, along with fellow Chinese marques Higer, Maxus, MG and Voltera, is already present in the local electric light vehicle segment, expected to pick up pace as price tags, closely associated to battery costs, fall.

In the energy storage and solar panel segments in particular, the former is expected to grow apace following approval of an associated bill last year that opens the doors for standalone units – companies that can offer supply-side agility and attractive prices hold a competitive edge, something which Chile’s nascent green hydrogen industry will also likely look for. 

With existing electrolyzer-production muscles – China accounts for around a third of global production capacity, according to European research institute Merics – and known ability to quickly ramp up output, China appears well-placed to ride the initial wave this decade.   

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