Jun 04, 2010, SANTIAGO (Dow Jones)--Chilean power generator Energia Austral Ltda., a subsidiary of global diversified mining company Xstrata PLC (XTA.LN), is looking for a partner to take over development of its hydroelectric projects in southern Chile.
Energia Austral has three hydroelectric projects in its pipeline in the southern Aysen region of Chile, including the 640-megawatt Cuervo plant, which is pending environmental approval, and the 360-megawatt Blanco and 54-megawatt Condor projects, which have yet to complete their environmental-impact studies.
"The idea is to find a controlling partner, a national or international company, that has expertise in developing hydroelectric projects," Francisco Jimenez, associate at investment bank Asset Chile, told Dow Jones Newswires. "This isn't part of Xtrata's core business, so they want to hook up with someone with proven experience with these types of projects."
Xstrata hired Asset Chile to find a strategic partner in the development of the hydroelectric projects, which will require an estimated investment of $2.5 billion.
"We want to strengthen the development of the projects; that's why we're looking for someone with expertise in the industry," said Energia Austral spokeswoman Marcela Riquelme.
The power these projects generate won't be used at Xtrata's copper mines in northern Chile, which include the Lomas Bayas copper mine, Altonorte Metallurgical Complex, and a 44% interest in the Collahuasi joint-venture mine, all of which operate on the northern SING power grid.
Instead, Energia Austral will inject the power into the nation's Central Interconnected System, or SIC, which provides power to more than 90% of Chilean homes, covering an area from northern Tal Tal to the southern island of Chiloe.
Meanwhile, Energia Austral is considering approaching the nearby HidroAysen project, a joint venture between Chilean power generators Empresa Nacional de Electricidad SA (EOC, ENDESA.SN) and Colbun SA (COLBUN.SN) to share the lengthy transmission lines needed to connect the plants to the grid.
HidroAysen, which is also awaiting environmental approval, will cost at least $3.2 billion. It will include five dams, supply some 2,750 megawatts to the SIC grid, and need a transmission line of nearly 2,000 kilometers.
Critics of HidroAysen point to the length of the transmission line as one of the project's main detractions, as it would stretch through pristine land, as much as they oppose the damming of the Baker and Pascua rivers.
However, due to the proximity of both projects, Energia Austral is looking into the possibility of developing the transmission line jointly--although neither Endesa nor Colbun could join as full partners in Energia Austral as they can't buy any more rights near HidroAysen for antitrust reasons.
"We're interested in seeing what synergies we can create with regards to the transmission line," said Energia Austral's Riquelme, adding that they hadn't yet held "formal talks" with HidroAysen.
A joint transmission line might not work, however, because the timing of the two sets of projects could be very different.
"It's wishful thinking," said Hugh Rudnick, professor at Universidad Catolica and energy expert. "The projects aren't necessarily going to be developed at the same time."
As of December 2009, the SIC grid had an installed capacity of 11,352 megawatts, with 47.0% of that coming from hydroelectric generators, 52.3% from coal-fired plants and 0.7% from wind farms.