Chile Power Report Q2 2016
BMI View: We maintain our positive outlook for Chile's power market, premised on its stable businessenvironment and investor-friendly regulations, an upbeat macroeconomic prospect and robust growth inpower consumption. The government's use of energy auctions for the regulated market, coupled with energydemand from miners located far from the main power network, will create long-term business opportunitiesfor power generators. Meanwhile, the need to expand Chile's power grid will drive demand for transmissioninfrastructure.
Latest Updates And Structural Trends
In December 2015, Chile's national oil company (NOC) ENAP signed an agreement with Japan's Mitsuifor the development of two combined-cycle gas-fired thermal power plants, the 760MW Luz Minera andthe 510MW Nueva Era plants. The projects - which reportedly have a cumulative investment value ofalmost USD1.5bn - are planned to be built in northern and central Chile, respectively, receiving feedstockfrom the Quintero and Mejillones liquefied natural gas (LNG) import terminals. ENAP plans to bid thetwo gas-fired projects in the upcoming auction for procuring power for Chile's regulated market,scheduled for May 2016.
In January 2016, a bill allowing ENAP to access the power generation sector - by holding a stake of up to66% in power generation projects, under joint ventures (JVs) with private companies - received thedefinitive approval by the Chilean parliament. The government is committed to making ENAP a newpillar of Chile's electricity market, as it hopes that participation of the NOC in the production ofelectricity from natural gas will drive down the country's electricity prices.
These developments support our upbeat growth outlook for gas-fired power generation in Chile over thenext 10 years. Our forecast is also premised on progress in the development of several other gas-firedpower plants in the country, low international LNG prices due to a global glut and the government'scommitment to increasing the role of gas in Chile's energy matrix.
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