Power Opportunities

An Expert's View about Foreign Direct Investment in Peru

Last updated: 22 Mar 2011

The electricity sector in Peru has experiencedimpressive improvements in the past 19 years.

Sector briefing Power Opportunities in Peru Why Peru? The electricity sector in Peru has experienced impressive improvements in the past 19 years. Access to electricity has increased from 45% in 1990 to 80% in 2009, while service quality and efficiency of service provision improved. These improvements were made possible through privatisations following reforms initiated in 1992. At the same time, electricity tariffs have remained in line with the average for Latin America. However, several challenges remain. Chief among them are the still very low level of access in rural areas and the untapped potential of some renewable energies, in opportunities and an introduction to other particular wind and solar energy, due to an relevant issues. inadequate regulatory framework. Peruvian government In 2009 the investment on the electricity sector reached the amount of US$1118M, and, encourages and protects according to the National Society of Mining, foreign investment. Current Hydrocarbons and Energy, investment on the demand for energy is about electricity sector would reach the amount of US$3400M during 2010 4600MW, which will double by -2020 2020. Find general information on Peruvian market conditions on UKTI?s website. The Doing Business Guide for Peru gives an overview of Peru?s economy, business culture, potential UK Trade & Investment Sector briefing: Power opportunities in Peru investment on the electricity sector reached Opportunities the amount of US$1118M, 43% of which corresponded to generating companies, 20% to Installed capacity distributing companies and 16% to rural Installed generating capacity in Peru is evenly electrification works, according to the local divided between thermal and hydroelectric Ministry of Energy and Mines. sources. Of the total capacity, 84% (5.63 GW) enters the electricity market, while the Generation remaining 16% (1.03 GW) is generated for 38 companies generate electricity for the self-consumption. market, while 78 companies produce electricity for their own use. Among the 38 companies However, electricity generation is not evenly supplying energy to the market, four of them divided between the two dominating sources. account for 70% of the total capacity: 72% of Peru?s total electricity generation came ? EDEGEL S.A.: 1,574MW from hydroelectric plants (total generation was ? ELECTROPERU S.A.: 1,032 MW 27.4 TWh), with conventional thermal plants ? ENERSUR: 725 MW only in operation during peak load periods or ? EGENOR: 522 MW when hydroelectric output is curtailed by ELECTROPERU dominates hydroelectric weather events. This ?underuse? of the production, with 32% of the total, while country?s thermal capacity is due to the high EDEGEL leads thermal generation also with variable costs of thermal generation. 32% of the total. Private companies dominate the generation In an attempt to reduce the country?s reliance sector. In terms of participation, state upon hydroelectricity, the Peruvian government companies hold 31% of generation capacity, has encouraged greater investment in gas-fired with the remaining 69% in private hands. power plants. The Camisea Gas Project has opened up natural gas production in Peru, with Transmission the first new 140 MW gas-fired power plant in In Peru, 100% of the transmission activities Tumbes. The Camisea project is considered are in private hands. In 2006, there were 6 strategic for it is expected to contribute to purely transmission companies that reduce the existing deficit in Peru?s participated in electricity transmission in Perú: hydrocarbons trade balance by substituting Red de Energía del Perú S.A. (REPSA), with imports (mainly of diesel and LPG) and 28% of the transmission lines; and Consorcio allowing exports (naphtha, LPG surpluses). Energético Huancavelica (CONENHUA), Consorcio Transmantaro S.A. (S.A. The dynamic nature of the electricity sector has Transmantaro), Eteselva S.R.L, Interconexión continued during 2007, with an estimated Eléctrica ISA Perú (ISAPERU) and Red Eléctrica 9.3% increase in generation, which is expected del Sur.S.A. (REDESUR), with 15% of the lines. to reach 30 TWh. This increase is mainly due to Generation and distribution utilities and the the existing positive conditions for thermal companies that generate electricity for their generation through the use of natural gas in own consumption operate the remaining 57% new plants and also to an increase in of the transmission lines. hydroelectric generation due to the availability of hydrological resources in the existing Distribution hydroelectric facilities In 2009, 63% of the electricity was commercialized by 22 distribution companies, Peru?s electricity installed capacity is currently while the remaining 37% was commercialized 7270 MW, of which 85% is joined to the directly by generation companies. The national grid (National Interconnected System companies that stood out for their sales to - SEIN) and the remainder to local ?isolated? end-consumers were: Luz del Sur (21%), systems. The Ministry of Energy predicts Edelnor (21%), Enersur (9%), Edegel (8%), growth in demand of 7.3% annually to 2015 as Electroperú (5%), Hidrandina (4%), a result of a nation-wide rural electrification Termoselva (4%) and Electroandes (4%). programme and the expansion of the mining Public distribution companies supply electricity sector and other industries, which is taking to 55% of the existing clients, with the place at present. remaining 45% in hands of the private utilities. However, in terms of electricity distributed, Electrical coverage is only 78% at national private companies have the lead with 71% of level, one of the lowest among the largest countries in Latin America. In 2009 the UK Trade & Investment Sector briefing: Power opportunities in Peru the total as opposed to 29% for the public Michiquillay with 120 MW. There are many ones. mining companies that have been able to create small hydroelectric power stations to Demand supply their energy needs. The consumption share for the different economic sectors is as follows: Industrial 66%, At present, the mining industry generates 23% Residential 24%, Commercial 19% and Public of its own energy from hydroelectric power lighting 3%. plants, with a capacity of 73.6 MW which represents 27% of the total; and thermal In terms of demand projections, the Ministry of power plants, with 202.24 MW representing the Energy and Mines estimates that electricity remaining 73%. demand will increase between 5.6% and 7.4% per year between 2007-2015. It is expected Large infrastructure projects for airports, ports that per capita electricity demand will reach and land transportation will create a larger 1,632 kWh in 2030. energy demand in the near future too. To meet this increasing demand, Peru will rely on natural gas, which is the most cost Hydro competitive option among all other fuel types. Hydroelectricity is the only renewable resource As such, it is expected that installed capacity of exploited in Peru. The largest hydroelectric gas-fired electricity generation increases from facility in the country is the 900 MW Mantaro 0.3 GW in 2002 to 6.0 GW in 2030. It is complex in southern Peru, which is operated by expected that, from 2026 onwards, natural gas state-owned Electroperu. The two hydroelectric will acquire the dominant share in the plants at the complex generate over one-third electricity generation mix, reaching 44% in of Peru?s total electricity supply. In February 2030 compared with hydroelectricity's 37% 2006, Egecen S.A. completed construction of share for the same year. the 130-MW Yuncán hydroelectric plant, located northeast of Lima. The plant is Currently the demand for energy in Peru is operated by EnerSur, a subsidiary of Brussels- about 4600MW. However, Peru has grown at based Suez Energy International. an average of 6% per year since 2000 with 8%+ being forecast for 2010 and if this rate of Peru has a potential of 60 thousand megawatts growth continues the demand for energy will on hydro energy and only 5% is being used. almost double by 2020. According to the Ministry of Energy there are 12 hydro projects at feasibility level and Peru is attracting huge levels of FDI in the studies of which 10 additional projects have extractive industries (mining in particular) with started. estimated investments of almost USD 50 billion expected over the next 6 years. Mining and oil The main hydroelectric companies operating in and gas are energy-hungry sectors and have Peru are Electroperu, Egasa, Egesur and San many sites in remote areas, which will possibly Gaban. require their own source of power generation. In the mid and long term, according to the There are opportunities in energy generation, Peru ? Brazil Agreement signed in April 2009, with over USD 1.1 billion being invested in six large hydro power stations will be built in 2009 in various generation, distribution and the Peruvian Jungle, which sums up 6,500 MW, transmission projects. Peru has developed its own sources of natural gas so the construction estimating that Inambari of 2,200 MW and of gas-fired power stations has expanded over Paquitzango currently under engineering the last 6-7 years so that gas now provides studies could be operative by 2017. These 45% of energy generation in Peru, most of the projects will be carried out by ElectroPeru- remainder being hydro. Electrobras. The requirement of some 1207 MW of energy Construction on the multi-purpose Olmos by 2020 will be the new challenge in supplying Trasandino Project has been underway since to the large mining projects in the north of the 2006 and the contract for its hydroelectricity country. The major energy needs come from power plant is expected to be issued in 2011. the Rio Blanco copper project, with 140MW, The power station in northwest Peru's the expansion of Antamina, with 150 MW, Cajamarca province will have a 600 MW Galeno with 124 MW and Cañariaco, La Granja, capacity and produce 4,000 GWh annually. UK Trade & Investment Sector briefing: Power opportunities in Peru ORGANISATIONS Thermal Peru has been adding some new energy MEM (Ministry of Energy and Mines) generation capacity, primarily through the Minister, Pedro Sanchez Gamarra construction of thermal plants in Chilca, just Vice Minister Energy, Daniel Camac Gutierrez south of Lima. The company Termochilca Web site: www.minem.gob.pe announced an investment of US$ 500 million in the construction of new thermal plant with OSINERGMIN (Peruvian Energy Regulator) natural gas. The project will produce 200 MW Riquel Mitma, Technical Coordinator ?Tariff by 2011 and 600 MW in 2014. Regulation Directorate Email: rmitma@osinerg.gob.pe Several concessions for new transmission lines Web site: www.osinerg.gob.pe have also been let. However, this expansion still appears to be not enough. Generation PROINVERSION (Private Investment reserve levels have dropped dangerously low, Promotion Agency) which is one of the main problems in the sector Dr. Jorge Leon Ballen, Executive Director today. Email: cchavez@proinversion.gob.pe Web site: www.proinversion.gob.pe LNG announced the construction of a Thermal plant at their natural gas liquefaction plant SNMPE (The National Society for Mining, Melchorita II with a capacity of 77,4MW. The Hydrocarbons and Energy) project will demand an investment of US$ Caterina Podestá, General Manager 3,800 million. Email: postmaster@snmpe.org.pe Web site: www.snmpe.org.pe Malvinas thermal power plant of 400 to 600 Mw in Las Malvinas ? to be located in Cusco. Estimated investment USD 500 million. For further information on the projects and opportunities listed above please contact the UK Trade and Investment office in Lima at ukti.lima@fco.gov.uk If you have any questions on the opportunities above, contact the UKTI contacts named in this report. Business opportunities aimed specifically at UK companies are added daily to UKTI?s website. These leads are sourced by our staff overseas in British Embassies, High Commissions and Consulates, across all sectors and in over 100 markets. You can be alerted to business opportunities on a regular basis by registering on the UKTI website. Find out more on UKTI?s business opportunities service on the UKTI website. UK Trade & Investment Sector briefing: Power opportunities in Peru Major events and activities UKTI contacts FIGAS ? International Trade Fair for Gas Miguel Olivera http://www.thaiscorp.com/figas/ Business Development Manager Contact: Guillermo Thais / Thais Corporation British Embassy Lima Email: thais@amauta.rcp.net.pe Tel: (00511) 617 3033 Time: 23-25 August 2012 (every 2 years) Email: miguel.olivera@fco.gov.uk www.ukti.gov.uk COBER - Renewable Energies & Biofuel Contact: Pedro Gamio Sharon Ganney Email: pedro.gamio@gveinternational.org Trade & Investment Director Time: October 2011 (every year) British Embassy Lima Tel: (00511) 617 3031 Find full details of all events in this Email: sharon.ganney@fco.gov.uk country and sector on the UKTI website. www.ukti.gov.uk New export events are added daily to the site and you can register to be alerted to them on a daily, weekly or monthly basis UKTI?s Tradeshow Access Programme (TAP) provides grant support for eligible Small & Medium Sized Enterprises (SME's) to attend trade shows overseas. Find out more about UKTI support for attendance at overseas events UK Trade & Investment Sector briefing: Power opportunities in Peru Next steps - How UKTI can help ? Arranging appointments British companies wishing to develop their ? Organise seminars or other events for business in the Peruvian market are advised to you to meet contacts and promote your undertake as much market research and company in the Peruvian market planning as possible in the UK. UKTI?s team in Peru, with its wide local knowledge and This work is available via our Overseas Market experience, can provide a range of services to Introduction Service (OMIS) a chargeable British-based companies wishing to grow their service which assists British-based companies business in global markets. wishing to enter or expand their business in This can include: overseas markets. ? Provision of market information ? Validated lists of agents/distributors To find out more about commissioning this ? Key market players or potential work, or accessing other UKTI services and customers in the Peruvian market specialist advice, please visit the UKTI website ? Establishment of interest of such to find contact details for your local UKTI contacts in working with you office. Whereas every effort has been made to ensure that the information given in this document is accurate, neither UK Trade & Investment nor its parent Departments (the Department for Business, Innovation & Skills, and the Foreign & Commonwealth Office), accept liability for any errors, omissions or misleading statements, and no warranty is given or responsibility accepted as to the standing of any individual, firm, company or other organisation mentioned. Published 2010 by UK Trade & Investment. Crown Copyright © UK Trade & Investment Sector briefing: Power opportunities in Peru
Posted: 22 March 2011, last updated 22 March 2011

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