Peru's electrical connection projects: A safe bet in a high-growth sector

In the last 10 years (2010 - 2019), the Peruvian economy registered one of the highest growth rates in Latin America, averaging a 4.5% expansion, according to estimates from the national statistics institute, driven by investment, consumption and external demand.

This important advance in the national economy generated, in turn, a strong increase in the demand for electricity throughout the country. As new projects emerged (in all productive sectors), and demand from households increased, investments in this sector intensified. The demand for electric power grew at an average annual rate of 6% from 2010 to 2019.

Although the national economy recorded a contraction in 2020, this year it will grow by around 10% thanks to the fiscal and monetary policies applied to contain and reverse the effects generated by the pandemic. The IMF estimates Peru's economy will grow 7.3% in 2021, the highest rate in South America. And the longer-term outlook is also favorable.

In this context, it is foreseeable that in the coming years there will be greater demand for electric power.

Precisely, foreseeing that rising demand, the Peruvian State is launching the Comprehensive Project Contest for the concession of the following projects: the 500 kV Transmission Line Substation Piura Nueva-Frontera  and the 138 kV Transmission Line Puerto Maldonado-Iberia and Valle del Chira Substation of 220/60 / 22.9 kV.

These projects will be awarded under the modality of self-financed public-private partnership (PPP) to the bidder that offers the lowest total service cost. The concessionaires will be in charge of designing, financing, building, operating and maintaining the aforementioned projects.

In both processes, the awardee will have access to the benefits granted by Peruvian law to new infrastructure concessions, such as legal stability agreements and early refund of the General Sales Tax (IGV or VAT), among others.

PERU-ECUADOR INTERCONNECTION PROJECT

The 500 kV Transmission Line Piura Nueva-Frontera Substation project is part of the Comprehensive Peru-Ecuador Interconnection Project, and aims to promote the development of the electrical interconnection between Peru and Ecuador with the participation of private investment, which will allow, in addition to ensuring the electricity supply in both countries, electric power supply exchanges and transactions between both countries.

The estimated investment in this project is US$163.5 million (not including VAT), and the concession term is 30 years from the start of commercial operations.

Among the obligations of the concessionaire is the construction of the Piura Nueva-Frontera 500 kV Transmission Line in Peruvian territory, from the SE Piura Nueva to the border crossing point, with an approximate length of 263.7km and a shortlist with support structures prepared for two triples.

Likewise, the 500 kV expansion of the Piura Nueva Substation (currently under construction), which includes a diameter of the switch and a half configuration, a 500 kV three-phase bar reactor with its respective cell, complementary systems and a separation scheme of areas between the transmission systems of Peru and Ecuador, in order to maintain the supply of electricity in the northern part of Peru through a system that allows the disconnection of both electrical systems in the event of instability.

“The importance of our tender is that it will develop the Peruvian stretch, while Ecuador does the same with its stretch and in this way the electrical interconnection between Peru and Ecuador will be a reality in the medium term and will bring benefits to both countries. The development of the technical aspects of the interconnection is coordinated by a binational commission,” said PROINVERSIÓN's project director Aníbal del Águila.

He added that both stretches will be on the border and when the interconnection line comes into operation there will be guaranteed electricity supply for both countries in cases of force majeure events such as earthquakes, floods, etc.

It should be noted that the hydrology of Peru is complemented by that of Ecuador; that is, when it's rainy season in Peru, in Ecuador it's not, and vice versa, which allows access to more efficient (lower) prices for the exchange of energy when there is a hydraulic generation surplus.

Another important point to highlight is that this project will meet the demand for electricity in their respective areas of influence in the Peruvian departments of Tumbes and Piura, with the appropriate standards of quality and reliability of supply.

The next milestones in the process are the payment of the auction participation rights and presentation of the qualification request, expected by April 2021; as well as the publication of the Consolidated Terms and Conditions and the Final Version of the Contract for May 2021.

The interested investor can review the tender documents, which contain the conditions and requirements to participate (together with the corresponding activities schedule and the guarantees to be presented) as well as the contract projects on the PROINVERSIÓN institutional portal (http://info.proinversion.gob.pe/lt-piura-nueva-frontera/).

ONE PROCESS, TWO PROJECTS

The other important process that Peru has been promoting is made up of the projects 138 kV Puerto Maldonado-Iberia Transmission Line and 220/60 / 22.9 kV Valle del Chira Substation; a process that was called to tender for comprehensive projects last September.

The 138 kV Puerto Maldonado-Iberia Transmission Line project is located in the department of Madre de Dios, at the southern end of the Peruvian jungle. It is located 900km from Peruvian capital Lima and is one of the main trade hubs in the Amazon; it connects with Brazil and Bolivia through the South interoceanic highway.

Madre de Dios has registered strong economic growth in the last decade driven by commerce, forestry and mining activities, generating conditions of greater demand for electric power from investment projects, companies and households.

In this sense, the 138 kV Puerto Maldonado-Iberia Transmission Line project will provide electric power to various locations in Madre de Dios (around Puerto Maldonado, Iberia and others) with the appropriate quality and reliability standards of supply; electric power will come from the National Interconnected Electric System (SEIN).

According to estimates by PROINVERSIÓN, this project will benefit more than 122,000 Peruvians from Madre de Dios and requires an estimated investment of US$33 million (not including VAT).

For an efficient service, the concessionaire must build the following infrastructure: Transmission Line Puerto Maldonado-Iberia of approximately 160 km; Iberia Substation 138/22.9 kV 25 MVA, and the expansion of the Puerto Maldonado Substation.

For its part, the “220/60 / 22.9 kV Valle del Chira Substation is located in the booming department of Piura.

This important project will allow to consolidate the operation of the electrical system of the northern zone of Peru, in the relevant technical aspects to provide the energy supply with adequate quality standards. It will contribute to the solution of the technical problems that the system presents, such as congestion in transmission lines and the voltage drop in substation busbars.

This project will benefit more than 441,000 inhabitants of the department of Piura. The total investment amount of the Project, not including IGV, is estimated at about US$13 million.

The project awardee must implement the following components: Valle del Chira Substation 220/60 / 22.9 kV - 100 MVA; Variant of the 220 kV Piura Oeste-Talara TL; and Variant of the LT 60 Kv La Huaca-Sullana.

The projects 138 kV Transmission Line Puerto Maldonado-Iberia and Substation Valle del Chira 220/60 / 22.9 kV are self-financed state initiative. The concession term is 30 years, beginning with the start of commercial operations.

According to the process schedule, the qualification request must be filed by February 3, 2021. The tender documents can be found at: http://info.proinversion.gob.pe/lt-maldonado-iberia-chira

Certainly, both processes and projects 500 kV Transmission Line Piura Nueva-Frontera Substation and 138 kV Transmission Line Puerto Maldonado- Iberia and Valle del Chira 220/60 / 22.9 kV Substation will allow Peru to sustain and accompany its economic growth, generating excellent conditions for a safe bet for private investment.