LatAm electric power weekly wrap

Bnamericas Published: Friday, January 10, 2003
US oil company Marathon this week announced the selection of the UK's Kellogg Brown & Root (KBR) and Italy's Techint as engineering, procurement and construction (EPC) contractors for a proposed liquefied natural gas (LNG) project near Mexico's Baja California state capital Tijuana. But then, and somewhat unexpectedly, the state government announced that the project site is not designated to host industrial developments, and thanked Marathon for its interest in the state. Baja's human settlements and public works secretary is in Mexico City through the end of the week and has not been available for comment. According to plans, KBR will provide engineering for the project's offloading terminal, regasification plant, desalination plant and natural gas pipeline infrastructure. A KBR-Techint joint venture will then carry out detailed engineering, procurement, construction, commissioning and testing activities. Elsewhere in Mexico, local press reported that weak economic growth and the resulting smaller than expected growth for electric power has enabled state power company CFE to delay a number of generation projects. Power demand has grown 2.5% a year for the last two years, compared to previous levels of 6%, the CFE's financed investment projects director Eugenio Laris said, adding that "projects that should have started operations in 2005 will now do so in 2006." But the CFE moved forward with at least two projects. It invited companies to submit bids for a 15-year contract to build, operate and maintain a liquid natural gas (LNG) regasification plant in Altamira in Tamaulipas state. The CFE will open technical bids on April 22 and economic bids on April 29. The plant will produce 14 million cubic meters a day of natural gas from imported LNG and will supply the Altamira V, Tuxpan V and Tamazunchale combined cycle power plants. Then the CFE awarded Spanish engineering and consulting firm Iberinco a US$56mn contract to build a transmission line in northeast Mexico. Iberinco is a subsidiary of Spanish power group Iberdrola. Heading south to Colombia, the government and mining association Asomineros launched a campaign to encourage coal exports to fire thermo plants in Chile, Peru, Ecuador and Central America. This initiative has been mostly designed to promote coal exports from the center and west of the country where coal is high quality and much cheaper for use in thermo power generation, Asomineros president Carlos Alberto Uribe said. "This type of coal could cost half the price presently being paid for bunker fuel, which, although subsidized, costs twice what it would cost to generate energy using coal from Colombia," he added. In Peru there was news that regional governments opposed to the privatization of the country's electric sector could disrupt the sale of a take-or-pay natural gas contract. State power company Electroperu signed the take-or-pay contract with the Camisea consortium to guarantee the purchase of at least 2 million cubic meters a day of natural gas. Investment promotion agency ProInversion now wants to sell the contract to a private investor prepared to build a thermoelectric power plant. Still in Peru, a commission studying plans to privatize the 130MW Yuncan hydroelectric plant in Peru's Pasco department will present its report to ProInversion on January 12, Pasco department's energy and mines director Ruben Palomino said. State power company Egecen is building the US$130mn plant, with the Japan Bank for International Cooperation providing 75% of the financing and the central government providing the remaining 25%. ProInversion is currently tendering a 30-year concession for a private sector company to operate the plant. But fervent local opposition could disrupt the concession process and force the local government to take over operations of the project. News emerged in Brazil that the local subsidiary of Anglo-Australian resources group BHP Billiton is negotiating a new electric power supply contract for its Alumar aluminum smelter in northern Brazil. Alumar pays US$5mn a month for 320MW from federal power company Eletronorte. The 20-year contract with the power company expires in 2004. "We have already had preliminary discussions [with Eletronorte], but we have not arrived at the stage of proposals due to the change in government," Sabastiao Ribeiro, the new president of BHP Billiton's Brazilian division, said. And Brazil's government will seek to modify its agreement with the International Monetary Fund (IMF) to exclude federal power company Eletrobras from the primary surplus target from 2004, incoming Eletrobras president Luiz Pinguelli said. Under the IMF agreement, investments carried out by government-controlled companies are considered to be part of the government's accounts and are included in the primary surplus. The primary surplus target for 2003 is 3.75% of GDP, already considered an ambitious target by some analysts and expected to be tightened for 2004. But the government wants to use Eletrobras, which has a very low debt level, to raise more debt to carry out significant investments in the electric power sector. Also in Brazil, Minas Gerais state's new governor Aecio Neves suggested that national development bank BNDES take over the stakes owned by three private investors in state power company Cemig. In 1997 US-based AES and Mirant and Brazilian investment group Opportunity acquired a 33% stake in Cemig for US$1bn. BNDES put up a significant amount of financing for the deal and repayments have recently run in to trouble. Neves is reported to have made the suggestion to President Luiz Inacio Lula da Silva at end-2002, as a way for BNDES to recover the loans. Neves is reported to have left the meeting "satisfied" that Lula would support the move. And local press reported that Argentina's President Eduardo Duhalde will raise his doubts over the sale of local energy company Perez Companc (Pecom) to Brazil's federal energy company Petrobras when Lula visits Buenos Aires on January 14. In October 2002, Petrobras agreed to buy a controlling 58.6% stake in Pecom for US$1.03bn, but neither the Argentine anti-trust authorities nor the gas and electricity regulators have yet approved the deal. The Argentine president is concerned about the ramifications of the deal on the local gas and electricity markets. And finally, Bolivia's former president Jaime Paz Zamora said this week that the country would be better off deploying its 52 trillion cubic feet natural gas reserves to generate power and produce value-added products such as petrochemicals rather than exporting it to North America as liquefied natural gas (LNG). "We should favor consumption in Bolivia, and only if there are reserves left then think about reaching California," Paz Zamora said RESULTS & FIGURES Total investment in Peru's electricity sector in the first three quarters of 2002 reached US$145.6mn, down 23% compared with the same period 2001. The public sector accounted for US$58.2mn or 40% of the total, while private investors accounted for the remaining US$87.4mn. The state invested US$32.7mn in generation, US$800,000 in transmission and US$24.7mn in distribution. The private sector meanwhile spent US$16.4mn on generation, US$33.1mn on transmission and US$37.9mn on distribution. At US$49.1mn, investment in generation in the period was down 32% year-on-year (yoy); US$33.9mn transmission investment was down 42% yoy; and US$62.9mn distribution investment was up 5% yoy. COMING UP Jan.14: The board and president of Brazil's federal power sector holding Electrobras are due to be appointed. Jan.16: Cambridge Energy Research Associates (CERA) is hosting an executive retreat entitled "The Price of Delay: Mexico at a Crossroads" in the Hotel JW Marriott in Mexico City. For more information and details on how to register for the event see website Mar.30-Apr.1: South America's regional energy integration commission (CIER) is holding an international seminar called "Handling Demand and Production in Extreme Situations," in Caracas, Venezuela, at which the problems faced by energy sector operators face from El Nino-related weather phenomenon will be analyzed. See website for more details. May 11-14: Brazilian federal power company Chesf will host V SIMPASE - the fifth symposium on the automation of electrical systems - in Recife in Pernambuco state. More details are available at or by calling (55) 81 3229-4141. May 25-28: The Latin American Energy Regulators' Association (ARIAE) will hold its VII meeting in Oaxaca, Mexico. Contact David Acevedo at or (52) 55 5283-1509 for more details. May 25-28: Brazil's association of regulators (ABAR) will hold the III Brazilian congress on public services regulation in Rio Grande do Sul. More details are available at or by phoning +51.3231.3000. June 19-20: The Center for Business Intelligence (CBI) will hold an event called "Private Power Experience in Central America" in Miami, Florida. More information can be found on website Sept.9-12: Hannover Fairs holds a power generation and technology trade show and conference at the Transamerica Expo Center in Sao Paulo in Brazil. More details are available at Oct.19-24: Brazil's Minas Gerais state power company Cemig hosts the XVII SNPTEE national seminar on electrical energy transmission and production to be held in Uberlandia. See for more details.

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