Foreign power generation companies that arrived some years ago to the country are now facing strong hurdles to realize investments
12-Sept-2012 El Mercurio – News
Companies are fighting against judicialization, unfavorable judgments, and conflicts with communities:
Foreign power generation companies that arrived some years ago to the country are now facing strong hurdles to realize investments
The problems the Australian Origin and Pacific Hydro, Norwegian SN Power, and Swedish-Chilean Ecopower companies are facing are to be added to the already stopped Castilla project owned by Brazilian MPX and German E.ON
Within their energy policies, recent governments have considered to increase their competences in electric power generation by allowing entrance of foreign investors into the business. However that purpose has only been partially achieved.
Although many foreign companies have decided to invest in national electric power sector, most of them have faced several difficulties that have reduced their growth projection in Chile. All main companies that arrived to the country lately have experienced problems such as adverse legal judgments, judicialization or conflicts with communities.
Most recent and freshest example is stoppage of Castilla thermoelectric plant (2,100 MW) owned by Brazilian MPX and German E.ON. But there are others to add to the list. One of most emblematic examples goes back to 2008 when a Mapuche community opposed the Trayenko hydroelectric project (580 MW) owned by Norwegian SN Power. The conflict ended with the project stopped after a man shot one the executives of the European company.
The same company announced some months ago the sale of Totoral eolic park (46 MW). Some sources close to this market state that this property transfer is related to the low profitability NCRE have obtained.
More recent cases may be aggregated. Last May Supreme Court accepted an appeal against environmental evaluation process carried out by Cuervo plant owned by Australian Origin Energy (51%) and Swiss Xstrata (49%). The Australian company had joined the project only a few months before the court ruled to temporarily stop the project. Both companies must execute an additional survey to be submitted in 2013.
Besides, the problems Australian Pacific Hydro is facing must also be considered. The company has just been reported of an adverse judgment issued by Supreme Court on usage of water rights at Tinguiririca Valley where they have installed La Higuera and La Confluencia plants sharing property with SN Power all adding up 309 MW.
Additionally, both run-of-river hydroelectric plants have had engineering problems that keep La Higuera on standstill condition since late 2011.
Finally, Swedish-Chilean Ecopower plans to build a 112-MW eolic park in Chile were thwarted after Supreme Court accepted an appeal against the project for US$235 million.
René Muga, General Manager of Power Plants Association, states that the different hurdles the foreign companies are to leap over increase uncertainty level for electric power generation companies to invest in the country.
Likewise, Francisco Aguirre, Partner at Electroconsultores, asserts that this kind of problems increase the risk assessment of Chile as a place for foreign capitals investments. “This is very harmful for power generation sector. Those companies that were considering to invest in Chile are now going to think it twice and they could well start investing in some other place”, Aguirre says.
