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OO RUEHWEB

DE RUEHSG #0189/01 0611953
ZNR UUUUU ZZH
O 021953Z MAR 09
FM AMEMBASSY SANTIAGO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4540
RHMCSUU/DEPT OF ENERGY WASHINGTON DC IMMEDIATE
INFO RUCNMER/MERCOSUR COLLECTIVE IMMEDIATE
RUEHPE/AMEMBASSY LIMA 6016
RUEHLP/AMEMBASSY LA PAZ MAR BRASILIA 0726
RUEHMN/AMEMBASSY MONTEVIDEO 4267
RUEHAC/AMEMBASSY ASUNCION 3818
RUEHCV/AMEMBASSY CARACAS 1968

UNCLAS SANTIAGO 000189 
 
STATE FOR WHA/BSC, WHA/EPSC AND EEB/ESC/IEC 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ENRG KNNP SENV TRGY PGOV CI
SUBJECT:  CHILE'S ENERGY HIGHLIGHTS FEBRUARY 2009 
 
REF:  SANTIAGO 93 
 
¶1. (U) SUMMARY:  This cable provides highlights of activity in the 
Chilean energy sector during February 2009.  Chile's Energy Minister 
met with Secretary of Energy Chu in Washington to discuss 
collaboration on renewable energy and energy efficiency.  Supported 
by recent profits and regulatory improvements, Chile's power sector 
continues to expand with new thermal and wind projects.  Developers 
submitted environmental impact assessments for two new coal plants. 
A French wind turbine manufacturer plans to invest in feasibility 
studies and a French multinational signed a long-term power sale 
agreement.  The World Bank's International Finance Corporation (IFC) 
will support Chile's first project-financed wind farm. 
Environmental regulators rejected the environmental impact statement 
(EIS) for a new hydroelectric project and eight companies 
participated in a geothermal tender.  High prices for long-term 
energy supply contracts may result in increased consumer prices. 
Chile's natural gas distributor reported net losses for 2008.  End 
summary. 
 
Energy Minister Touts Chile's Renewable Resources 
--------------------------------------------- ---- 
 
¶2. (SBU) Energy Minister Marcelo Tokman met with U.S. Energy 
Secretary Chu in Washington, D.C. on February 19 (septel).  They 
discussed Chile's desire to be a strong partner with the U.S. in the 
as-yet-to-be-defined Energy Partnership of the Americas.  Tokman 
lauded collaboration with Lawrence Berkeley National Labs and 
expressed Chile's interest in increasing collaboration on energy 
efficiency and renewable energy.  In meetings with State Department 
officials, Tokman outlined plans for a renewable energy center, 
solicited support for a 10-15 megawatt solar project in northern 
Chile, and made the case for renewable energy pilot projects located 
in Chile. 
 
Power Sector Expands Despite Economic Crisis... 
--------------------------------------------- -- 
 
¶3. (U) In recent press reports, Minister Tokman said energy projects 
worth US$7.72 billion are under development in Chile and up to 
US$13.3 billion more could be approved this year. 
 
...New Thermal Plants and Wind Projects 
--------------------------------------- 
 
¶4. (U) Chilean firm Rio Seco submitted an EIS to Chile's national 
environmental regulator (CONAMA) for a US$750 million coal-fired 
plant in Chile's Region I.  The plant would be located about 60km 
south of Iquique and would add 350MW to the country's northern power 
grid. 
 
¶5. (U) Chilean generator Edelnor submitted an EIS for a 750MW 
coal-fired plant in Mejillones (Region II) to be connected to the 
SING grid.  Proposed investment in the project is US$1.5 billion and 
includes:  dock construction to import diesel, coal, biomass, and 
petcoke for the new plant; Edelnor's existing plant; and another 
related company's thermal plant. 
 
¶6. (U) At the beginning of February, UK renewable generation company 
Seawind submitted an EIS to construct a US$63 million wind farm in 
Canela.  If approved, developers will install 13 wind turbines to 
add 26MW of capacity to the country's central grid.  Seawind has 
several other wind farm projects in Chile including a 100MW, US$230 
million project in Qillagua. 
 
¶7. (U) On February 9, French wind turbine manufacturer Alstom 
announced intentions to invest in wind feasibility studies in Chile, 
with the goal of having the company's first operational wind farm 
with 45-60MW of capacity in 2012-2013. 
 
¶8. (U) According to GDF Suez's February 12 press release, 
construction started on its Monte Redondo wind farm, located 320 km 
north of Santiago, with an installed capacity of 38MW and a US$120 
million price tag.  On February 5, the company signed a 14-year 
contract for 100 GWh/year from the farm starting 2010. 
 
IFC Supports Chile's First-Ever Project Financed Wind Farm 
--------------------------------------------- ------ 
 
¶9. (U) On February 9, the World Bank's IFC signed an agreement to 
invest US$61.5 million in Chile's first ever project-financed wind 
farm, Totoral Park.  IFC's financing monetizes expected carbon 
revenues under the Kyoto Protocol's Clean Development Mechanism 
(CDM).  The 46MW project is being developed by Norvind SA, a 
joint-venture between Norway's SN Power and the Chilean investment 
company Centinela.  Totoral Park should be completed this year, is 
300 km north of Santiago, and will generate 110 GWh/year for the 
central grid.  According to the IFC, this is the first project under 
Chile's March 2008 "Non-Conventional Renewable Energy Law." 
 
Proposed New Hydro Project Stumbles on First Step 
--------------------------------------------- ---- 
 
¶10. (U) Chilean Hidroelectrica Trayenko, a joint-venture between SN 
Power (80 percent) and the Chilean investment fund Centinela (20 
percent), plans to invest US$1 billion in a 400MW hydroelectric 
power project over the next 5 years.  According to SN Power's 
website, it is conducting environmental and economic feasibility 
studies on four run-of-river projects in Chile's Region X. In 
mid-February, however, CONAMA rejected the EIS for the first phase 
of the project, a 320MW plant. 
 
Eight Companies Participating in Geothermal Concessions Bid 
--------------------------------------------- ------ 
 
¶11. (U) According to the Ministry of Mining, eight companies 
purchased bid packages (offers are due by March 31) for the tender 
on two geothermal blocks in Chile's Region I, including: Energia 
Andina (a joint-venture between ENAP and Antofagasta Minerales); 
Canada's Magma Energy, Polaris Energy, and Nevada Geothermal Power; 
New Zealand's GeoGlobal Energy; the Chilean branch of the British 
company Seawind; and a Chilean mining firm.  Also participating, 
Aquavant SA, a local subsidiary of the Israeli geothermal company 
Ormat Technologies, which has a major plant in Reno, Nevada. 
Long-term Electricity Contracts Likely to Drive Up Prices 
--------------------------------------------- ---------- 
 
¶12. (U) Chilean electricity distributors accepted offers from 
electricity generators for long-term (12-15 years) power supplies of 
7.11TWh/year, at an average price of US$104.312/MWh, beginning in 
¶2010.  The average price was above the US$75/MWh analysts expected 
and likely reflects that there is limited new capacity coming 
on-line before 2011. Besides guaranteeing a long-term supply of 
power to distributors, the contracts play a key role in determining 
the price regulated users will pay starting in 2010. 
 
Chile Metrogas Posts Losses for 2008 
------------------------------------ 
 
¶13. (U) Following announcements that Chile's national oil company, 
ENAP, lost over US$800 million (reftel), on February 25 Chile's 
natural gas distributor Metrogas reported a loss of about US$16.1 
million in 2008.  Higher Argentine taxes on gas exports increased 
operating costs while reduced gas imports affected Metrogas' ability 
to supply industrial customers. 
 
COMMENT: Diversifying its Energy Matrix Will Help Economy 
--------------------------------------------- ------- 
 
¶14. (SBU) Minister Tokman was in Washington, D.C. to participate in 
the Inter-American Development Bank's launch of "A Blueprint for 
Green Energy in the Americas 2009," which reports that Latin America 
and the Caribbean's share of CDM investment has decreased 
significantly since 2006.  As a stable country with a relatively 
large economy and substantial natural resources, however, Chile is 
still drawing foreign investment for renewable projects.  Despite 
murmurs of concern about greenhouse gas emissions, Chile also 
continues to expand thermal plants and expects to bring its first 
LNG regasification plant on-line this year.  Along with large 
hydroelectric projects, renewables are part of Chile's answer to its 
on-going energy crisis, but the economy is slowing down and the 
industrial demand for power may decrease, especially in the mining 
sector.  However, Chile is well-positioned to bounce back after the 
current economic crisis and on-going investment in renewables will 
provide an environmentally responsible way to fuel a return to 
economic growth.  End comment.