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Colbún calls for water law reform in light of gas crisis

Bnamericas Published: Saturday, April 17, 2004
Reforms to Chile's water law are crucial to optimize the use of the country's hydro resources and reduce dependence on gas-fired generation, newspaper Estrategia quoted Emilio Pellegrini, president of local power generator Colbún, as saying. The reform bill has been before congress for some time already, but companies have taken advantage of Argentina's recent decision to cut gas exports to Chile to highlight the need for hydro generation incentives, an analyst at ratings agency Fitch Chile, Carlos Diez, told BNamericas. Chile's largest generator, Endesa (NYSE: EOC), owns most of the water rights in southern Chile, which Colbún says is unfair, but Endesa says changing the water law - especially fixing the payment for water rights - will make hydroelectric projects more expensive. Reforming the water law is important because it would allow Colbún and other investors "real access to participate in the development of this country's hydro potential," he said. In terms of neighboring Argentina's gas crisis, Colbún's Pellegrini criticized the national energy commission (CNE) for its performance, arguing that the CNE should play a more active role to ensure gas supplies from Argentina. Going forward, "the biggest challenge for the electric sector authorities will be to establish conditions and give signs of adequate prices to achieve an equilibrium of generation capacity in the system between different energy sources," Pellegrini said. The CNE does not necessarily need to overhaul its energy policy, which is heavily dependent on gas, just because of Argentina's recent gas crisis but it should diversify its generation sources to reduce reliance on gas, Diez said. "The system has worked well until now, with cheap natural gas from Argentina which has lowered energy prices," Diez said. Natural gas is the fuel of the future for Latin America despite the present day problems arising from Argentina's macroeconomic problems. A more practical contingency plan in emergency situations such as lower gas exports from Argentina could be to provide price incentives for coal-fired generation, he added.

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