CHILE'S ENERGY HIGHLIGHTS - JUNE 2009

UNCLAS SANTIAGO 000641 STATE FOR WHA/BSC, WHA/EPSC, AND EEB/ESC/IEC SIPDIS SENSITIVE E.O. 12958: N/A TAGS: ECON ENRG KNNP SENV TRGY PGOV CI SUBJECT: CHILE'S ENERGY HIGHLIGHTS - JUNE 2009 REF: (A) SANTIAGO 535; (B) SANTIAGO 496; (C) SANTIAGO 349 ¶1. (SBU) SUMMARY: This cable provides highlights of activity in the Chilean energy sector during June 2009. Chile and the U.S. signed a Memorandum of Understanding (MOU) to collaborate on alternative clean power development, a new renewable energy center (REC),and solar power plants, all in Chile. The GOC invited U.S. Energy Secretary Chu to Chile in October 2009. During a visit to Paris, Chile's Energy Minister met with the International Energy Agency (IEA),French energy officials, and signed two agreements to collaborate on developing renewable energy in Chile. Chile inaugurated its first liquid natural gas (LNG) regasification terminal in Quintero along with a $24 million gas pipeline. A U.S. company is planning to invest $1.5 billion in 500MW of geothermal projects in Chile over the next ten years. Over 1100 MW of wind projects were announced by multiple companies. The GOC plans to invest $10 million in a consortium to study producing biofuels from algae. Water available for hydroelectric generation may be down as much as 20 percent. Electricity profits are up, but 2010 demand is predicted to be less than expected. Chile's national petroleum company went from A to BBB in Standard and Poor's (S&P) risk rating. END SUMMARY. DOE AND CHILE SIGN CLEAN ENERGY MOU -------------- ¶2. (U) Chile's Minister of Energy, Marcelo Tokman, and U.S. Deputy Secretary of Energy, Daniel Poneman, signed an MOU on Energy Cooperation in Washington, DC, on June 23. In addition to working together to promote the development of solar, wind, geothermal, and ocean wave power, the two countries will collaborate on a new REC in Chile. The U.S. Department of Energy's National Renewable Energy Lab (NREL) will also help develop bid solicitations for two solar plants in northern Chile, and assist in bid evaluations and project implementation. ¶3. (SBU) On June 30, Chile's National Energy Commission (CNE) forwarded a letter from Minister Tokman to Energy Secretary Chu inviting him to participate in events to promote Renewable Energy Week in Antofagasta, Chile, October 5-9, 2009. FRANCE TO SUPPORT NEW RENEWABLE ENERGY CENTER -------------- ¶4. (U) As part of President Bachelet's visit to France at the end of May, Minister Tokman held meetings with power officials and IEA president, Nobuo Tanaka, who is expected to travel to Chile in October to present the results of an in-depth IEA review of Chile's energy sector. Separately, France and Chile signed two agreements to develop Chile's renewable energy sector through France's renewable power and environment agency (ADEME). During his visit, Tokman told a business group that investments in Chile's power sector could reach $27.5 billion by 2013. CHILE'S FIRST LNG REGASIFICATION PLANT -------------- ¶5. (U) Chile inaugurated its first LNG receiving and regasification terminal in Quintero (V Region, north of Santiago). The plant has the capacity to convert up to 2.5 million tons/year of LNG at a rate of 10 million cubic meters (cu m) of natural gas per day. It will supply gas to the country's two principal cities, Santiago and Valparaiso. The terminal is owned by Chilean companies ENAP, Endesa Chile, Metrogas and BG Group. ¶6. (U) Some liquid gas companies in Chile have criticized the government for requiring companies to use natural gas, e.g., the General Manager of Lipigas complained that the GOC's environmental agenda should not interfere with the market and companies should be permitted to choose natural gas, liquid gas or diesel. ELECTROGAS INAUGURATES $24 MILLION GAS PIPELINE -------------- -- ¶7. (U) Electrogas officially inaugurated a pipeline connecting the coastal town of Quintero with the inland town of Quillota, the site of two thermoelectric plants (San Isidro and Nehuenco). The pipeline has a transport capacity of 15 million cu m/day. U.S. GEOGLOBAL ENERGY TO INVEST $1.5 BILLION IN GEOTHERMAL -------------- -------------- ¶8. (U) U.S. Geoglobal Energy (GGE) in Chile announced plans to develop 500MW of installed geothermal capacity, involving investments of U.S. $1.5 billion, in Chile over the next ten years. GGE plans to begin by developing a $250 million, 75MW geothermal project in Tolhuaca (Region IX); construction will start in 2011 and create about 400 jobs. $235 MILLION WIND FARM - FIFTY 2MW TURBINES -------------- ¶9. (U) Element Power, a Chilean firm, has submitted an environmental impact statement for a $235 million wind farm to be installed in southern Chile, the Gulf of Arauco. This facility would have a capacity of 100MW and would be connected to Chile's central (SIC) grid via a new substation. SEVEN WIND FARMS PLANNED - TOTAL CAPACITY OF 850MW -------------- -------------- ¶10. (U) Thailand-based Resource Group International (RGI) announced it is partnering with a Chilean subsidiary of ANPL to construct seven wind farms with capacities from 60 to 150 MW located on Chile's northern (SING) and SIC grids. CODELCO PLANS WIND FARM WITH 250MW CAPCITY -------------- ¶11. (U) Chile's national copper company, CODELCO, presented an environmental impact assessment for a $700 million wind farm project in Calama with 125 wind generators, totaling 250 MW. It includes 2 sub-stations and transmission lines to connect to CODELCO facilities and the SING and is expected to generate 766,500 MWh annually (on average). GOC INVESTING $10 MILLION IN ALGAE STUDIES -------------- ¶12. (U) To promote the development of Chile's biofuels industry, Energy Minister Tokman announced plans to invest $10 million in a consortium to study producing biofuels from algae. According to Tokman, Energy Secretary Chu told him the U.S. could promote this initiative through the REC. DAM WATER LEVELS DOWN BY ROUGHLY 20 PERCENT -------------- ¶13. (U) According to Chile's national water authority, Direccion General de Aguas, water levels were down by roughly 20% in May compared to the same month last year. All dams except for Pangue, on the Bio-Bio River, show declines from 2008 levels. ELECTRICITY DEMAND UP, BUT 2009 FORECAST DOWN -------------- ¶14. (U) Minister Tokman announced that power demand on Chile's SIC grid increased 1.8% in May compared to the same month last year due to modest increases in industrial activity. However, total demand this year has fallen 0.3% compared to 2008 and CNE reduced 2009 demand growth projections from 4.7% to 2.1%. ELECTRICITY PROFITS OVER 150% -------------- ¶15. (U) Profits for the Chilean electricity group, Compania General de Electricidad (CGE) increased by 158.5% year-on-year to $88.1 million in the first quarter of 2009 due to increased exploitation revenues (up 9.8%),operating revenues (up 12.4%),and service sector profits (up 103%). [Note: CGE is one of Chile's leading electricity distributors, along with Endesa Spain's Chilectra; its holdings also include electricity generators and gas suppliers Gasco and Metrogas. End note.] STANDARD & POOR'S: ENAP FROM A TO BBB -------------- ¶16. (U) The risk classification of Chile's national petroleum company, ENAP, went from A to BBB this month. S&P cited ENAP's high level of debt and poor liquidity to justify the downgrade. URBAN