Chile green power draws punters

Listen to this article


Chile, the world’s top copper producing nation, has a problem: A lack of energy.

But an emerging markets-focused private equity firm, Actis, and Mainstream Renewable Power, say at least part of the answer is, literally, blowing in the wind.

They have teamed up to create Aela Energia, which will build five wind and solar plants across Chile to provide 600 MW of power (450 MW from wind and 150 MW from solar) within the next three years. Total investment is $1.4bn, including debt, of which Actis will put up $290m and Mainstream is putting in $170m.

It is Chile’s biggest wind and solar energy project and the partners say it will boost Chile’s renewable energy capacity by 3.6 per cent. That’s enough clean energy to power more than 131,000 homes.

Actis, which has $5.2bn of funds under management, will put in 60 per cent while Mainstream will put in the remainder. The project will use Chinese-made turbines, panels and equipment – China’s Goldwind will be a supplier, according to Eddie O’Connor, Mainstream’s CEO, who says he expects Chinese investment on the debt side as well.

O’Connor told beyondbrics he envisages the partnership providing 12,000 MW in Chile by 2030. For a country reliant on expensive imported fossil fuels, like liquefied natural gas, where there is opposition to nuclear power in a seismic country, and where environmental protests have scuppered or delayed big coal and hydropower projects, O’Connor is succinct:

This is really the future for Chile … Mining companies see investment of $106bn in the next 10 years to produce more copper. But they don’t have power. We will allow this economy to flourish.

Indeed, he goes as far as to say:

Without us, you couldn’t have growth in Chile.

Why is wind and sunshine the solution? First, because Chile has it in abundance, especially in the arid Atacama desert in the north. So the raw material for this power is free, renewable, and clean. And second, cost. Chile’s energy costs have soared in recent years, as Chile has been forced to buy energy more expensively, and from further away, to replace the natural gas that neighbouring Argentina used to export until 2007, when it turned off the taps and redirected supplies to its own booming demand.

The price of wind and solar power sounds compelling. As O’Connor says:

It’s around 2/3 of where we are now. It will make a big impact on the marginal price [of electricity] in Chile … Here we are working … to deliver the cheapest possible source of power in the world.

Actis and Mainstream are already working together in South Africa and Actis has a track-record of funding similar renewable ventures in Central America, including the Cerro de Hula project, the largest wind farm in central America, and management of Guatemala’s national electricity distributor.

Mainstream has projects totalling 17,000 MW in Ireland, South Africa, Canada, England, Scotland and Germany, as well as Chile, where it has been developing a portfolio of more than 3,500 MW of wind and solar projects since 2008.

Lucy Heintz, Actis deal leader for the project, says Central America shares many characteristics with Chile. And experience there has shown that, as she puts it:

Every time the wind blows, that country is importing less oil.

Related reading:
Sun rises on new era for industry, FT
Wheels of industry lack vital spark, FT
Chile file, beyondbrics

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from and redistribute by email or post to the web.