The Americas in a World Context

Electric generating capacity in the Americas in 1997 was held primarily by two countries — the United States and Canada. Combined, those two countries alone accounted for 82% of total power generating capacity in the Hemisphere. Brazil, Mexico, Argentina, and Venezuela also have significant amounts of power generating capacity.

Canada and Paraguay are by far the largest power exporters in the Americas. In 1997, Canada exported 34 terawatthours (Twh) of power, almost totally to the United States. Paraguay exported

46 Twh, mainly to Brazil. About 57% of power in the Americas is generated by thermal (coal, oil, natural gas) plants. The remainder is generated by hydropower (25%), nuclear (16%), geothermal and other renewables (2%).

DOE/NREL Projects in Latin America

Brazil: In collaboration with Brazil’s Centro de Pesquisas de Energyi Eletrica. Use of renewables and hybrid energy systems in remote areas.

Argentina: Technical, economic, and regulatory assistance to provide wind turbines and photovoltaics in remote regions

Chile: Technical assistance for 6-year rural electrification program. Supply of renewable energy equipment to remote Chilean villages and residents.

Mexico: In cooperation with the Mexican government, goal is to increase use of renewable energy for environmental and economic reasons.

South America is one of the fastest growing world regions for electricity demand. Hydroelectricity accounts for a larger share of energy consumption in South America than in any other major world region.

On May 11, 1999, Spain’s Endesa purchased a 30% share in Chile’s Endesa, Latin America’s largest non-state power generator, for $1.85 billion. Spain’s Endesa also controls Chile’s power holding company Enersis

Argentina and Paraguay jointly own the $8 billion, Ente Binacional Yacyreta (EBY), hydroelectric dam on the Parana River. EBY now is 90% complete, and with a 3.1 gigawatt capacity, is one of the largest hydro complexes in the world. The two countries are considering another, $3.5 billion, hydro complex on the Parana River at Corpus.

The world’s first combined LNG terminal/combined cycle gas turbine power plant (EcoElectrica) project is under construction in Puerto Rico. The facility will include an LNG receiving terminal, power station, and desalinated water plant. EcoElectrica will be one of the most environmentally friendly/least polluting power plants in the world.

A $100 million power plant is being built in Trinidad and Tobago by U.S.-based InnCogen.

Mexico’s government is pushing to open up the country’s power sector to private investment. President Zedillo supports this, and has talked about needing $25 billion (largely from private investors) to upgrade and expand power generating capacity by one-third over the next 5 years to keep up with rapidly growing demand.

Beginning in 1992, Mexico began to allow private companies to generate power for their own use or to sell to state-owned companies. Full privatization would require a constitutional amendment passed by two-thirds of Mexico’s Congress. At present, Mexico’s constitution prohibits private companies from making a profit from natural resources. Mexico’s power system is controlled by two vertically integrated, state-owned companies – CFE and LFC.

Mexico’s 700 megawatt, gas-fired Salamayuca II power plant, the first in the country to be financed by a mix of public and private funds, was due to be completed in late 1998.

U.S. Power Sector Restructuring

The U.S. electric power industry saw major changes in 1998. The most significant change occurred on March 31, when retail customers of investor-owned utilities in California (approximately three-fourths of the State’s customers) were allowed direct access to an alternative energy (electricity) service provider. During 1998, California, Massachusetts, and Rhode Island opened their retail electricity markets. Meanwhile, legislatures and/or public utility commissions in 15 other states approved or implemented plans to move toward retail competition. In response, many electric utilities began restructuring their companies and selling their generating assets primarily to nonutility companies, causing a shift in power plant ownership patterns. The Clinton Administration has argued that electricity deregulation will cut national energy costs by $20 billion per year, although others have predicted that costs will not fall and may even rise.

The structure of the U.S. electricity industry also continued to evolve in 1998 as regional independent transmission system operators (or ISOs), power exchanges, and additional futures markets began operating.

U.S. electric power capacity growth in recent years has been almost entirely by nonutility generators (who tend to use oil and natural gas, as opposed to coal or hydroelectric).

Brazil’s power sector is in the midst of a radical change from state to private control. Five Brazilian power distributors are scheduled to be privatized during 1999, according to the Brazilian Development Bank. Brazil’s privatization of its electric power sector is breaking large integrated utility companies like CESP and Eletrobras into smaller units and selling off the generation and distribution pieces.

Argentina has been attempting to boost productivity in the power sector by transferring assets, including provincial power companies, from the state to the private sector. In April 1997, the Argentine Senate passed a bill allowing privatization of Argentina’s Atucha I, Embalse Rio Tercero, and (uncompleted) Atucha II nuclear plants.

Privatization of Venezuela’s power sector kicked off in 1998 with the sale of Sistema Electrico de Nueva Esparta (Seneca).

In late March 1999, Venezuela’s President Hugo Chavez announced his intention to privatize state-owned power companies. In May 1999, the government confirmed that it intended to press ahead with privatization of regional power companies. Currently, state-owned companies account for around 80% of Venezuela’s installed power capacity.

The Bahamas government has decided to privatize its power company (the Bahamas Electricity Corporation). Other ongoing power privatization efforts in the Caribbean include Haiti, Jamaica and the Dominican Republic (where severe electricity shortages and blackouts are common). Seabord and Coastal Corporations (U.S.), and Gener (Chile), all recently bought shares in the Dominican Republic’s power system.

Ecuador’s state electric company, Inecel, is set to be privatized in the near future. Privatization of Ecuador’s power sector has been proceeding slowly since 1995, but now appears to be accelerating.

Guyana has had limited success to date in privatizing its unprofitable state power company due to lack of investor interest.

Peru is pressing ahead with plans to invite private capital into its power sector, and to sell a series of electricity companies over the next year. The Cahua hydroelectric plant was state company Electroperu’s first plant to be privatized (in May 1995).

Select Electricity Mergers and Acquisitions Activity

Select Electricity Mergers and Acquisitions Activity With growth in electricity demand expected to increase by 6% per year in many parts of Latin America, many foreign utility companies have begun to acquire assets throughout the region. One such example is Teco Energy Inc., of the United States, which has invested more than $300 million in power facilities in Guatemala and Costa Rica. It recently has also acquired interests in Energia Global International, Ltd., another U.S.-based company with assets in El Salvador and Panama. In addition, Coastal Power owns interests in operational electricity plants in El Salvador and the Dominican Republic, as well as plants currently under construction in Nicaragua and Guatemala. Within the ?Southern Cone? region of South America, U.S.-based El Paso Energy International has acquired a 45% ownership interest in CAPSA, an Argentine company which owns a share of several gas-fired power plants in Argentina. Also, CMS Energy partially purchased several power plants, including two natural gas facilities and a hydroelectric complex. Within Brazil, AES recently acquired partial ownership of the three largest electricity companies in South America (Light, Rio de Janeiro; Metropolitan, Sao Paulo; and Cemig, Minas Gerais), serving more than 10 million customers (total) within the region.

Growing demand for electricity throughout the Americas, especially in countries such as Mexico and Brazil, has helped to foster the interconnection of the region’s various electricity grids. This trend is expected to continue as a result of further deregulation of the electricity sector, the easing of restrictions to international investment, and the development of cleaner, more efficient power plants.