Export Credit

It’s our oil, claims Endesa

La Tercera
June 26, 2004

Endesa, Chile’s largest utility, announces plans to build five
hydro-electric power stations in the next fifteen years for a total of
$ 2.8 billion.

According to the UN twelve million people die every year from lack of
water. In Chile, specially in the Patagonia region, this resource will
continue to exist abundantly. ‚Äú It’s our oil‚Äù, claims Endesa , the
country’s largest utility which sees in this region something like the
water version of the Persian Gulf. It’s here, in Chilean Patagonia,
where the utility plans to expand their electrical generation with
projects totaling $2.5 billion.

Endesa foresees developing five mega hydro power stations within the
next fifteen years, although it is also evaluating the construction of
two additional projects. Aside from Neltume, located in the tenth
region of Chile, in the next decade four hydro power stations would be
built in the Aysén region – two on the Baker river and two on the
Pascua , which will require a $1.5 billion investment with an
additional $1 billion for construction of power transmission
infrastructure. These series of stations will generate 2,800 MW of
electrical power, which by themselves can handle the increase in
electrical demands for the next seven years.

Neltume, on the Fuy river, will require a total investment of $300
million and will generate 300MW, the equivalent to the annual increase
in demand for electricity in the country. The engineering of the
projects proposed for the Aysén region would likely start next year
with construction starting towards the end of this decade and fully
operating by 2017. Prior to that, Neltume should become operational
with its environmental impact report to be submitted in 2005.

ENDESA also plans to take advantage of the large hydrological potential
found in the Futaleuf√∫ and Puelo rivers, both found in northern

Beyond Neltume, it’s clear that Endesa will concentrate in the austral
region. There is hydro capacity there to generate 12,000MW; the entire
electrical system in Chile could be replaced by tapping into Chilean
Patagonia alone.

ENDESA already controls water rights to generate 4,882MW of
electricity. This figure amounts to 70% of the current installed
capacity found in the Central Interconnected System (Chile’s main power
grid) and twelve times the annual growth in demand for electricity in

These figures could go up even further: ENDESA has requested additional
water rights in Patagonia to generate an additional 3,200MW. These
rights are on top of what they already own on the Baker river, the
country’s largest, and the Pascua.

ENDESA is not alone, other utilities like Colb√∫n and Gener also control
water rights in this austral region. Their current rights are capable
of generating 1,300MW and have requested additional water to generate
another 2,600.

ENDESA doesn’t have similar large size projects based on non hydro
sources of power. The closest in terms of size is the expansion of the
San Isidro power station which depends on natural gas and its expansion
has now been suspended due to the failing gas supply agreements with

The Tompkins Factor There is worry in ENDESA that Parque Pumalin, which
belongs to Douglas Tompkins, could become an obstacle to their
expansion in Patagonia. There isn’t a political or anti ecological
motivation in their apprehension; the utility mainly fears that high
power lines will not be able to cross the park if declared a Nature
Sanctuary by the Chilean government.

The President’s General Subsecretary, Rodrigo Ega√±a, refutes such
charges. “ This aspect is duly addressed in the agreements signed with
Tompkins in 1997, as well as in those signed last year, where it has
been clearly stated that electrical lines, roads and any other works of
national interest are to be allowed through the park.” To some of
ENDESA’s executives this wording is not sufficient. ‚Äú We want more
transparency”, one executive said.

Egaña disagrees. “ There are appropriate safeguards”. Evidence of this
is that since last year executives from the utility have not contacted
government officials at La Moneda, Chile’s government palace. At ENDESA
they acknowledge that they are not banging on doors and claim that
Egaña already has their proposal indicating where the transmission
lines and towers should be placed.


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