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SOUTH AMERICAN ENERGY MARKETS DAILY ROUNDUP (April 20, 2009): Argentine goernment raises $300m for 1.6GW CCGTs plants

April 20, 2009

South America Energy Markets (SAEM) publishes a daily roundup of the top-five stories affecting energy markets in the region with links. The roundup includes all the major web dailies of South America and other websites that write about the region’s energy markets. SAEM Daily Roundup appears from Monday through Friday and is published by noon London time.

Monday, April 20, 2009

ARGENTINA/POWER SECTOR

The Argentine government has secured the needed $300 million to convert the two single-cycle gas-fired plants at Campana and Timbues into combined cycle gas turbine (CCGT) plants. The plants are in Buenos Aires and Santa Fe province. Financing for the 1.6GW power CCGTs was received by the following groups: $251 million came from Anses, the former private pension fund nationalized by the government in November 2008, followed by  $49 million from banks such as Banco Nacion ($10 million), Bice ($10 million), Banco Provincia ($8 million), Banco Galicia ($5 million) as well as energy companies such as Pan American Energy ($3 million), YPF ($2 million) as well as others.  COMMENT: The government has built a lot of generating capacity in the past two years but has not yet proved up gas reserves and sufficient output. The problem will get worse before it improves.

ARGENTINA/ENERGY PROJECTS

Despite a downturn in government spending due to lower commodity and energy prices, Federal Planning Minister Julio De Vido said that investments in energy projects such as the 700MW Atucha II nuclear plant would move ahead, writes Buenos Aires business daily Ambito Financiero. “The government will continue to raise, if necessary, investment in public projects,” he said. Atucha II, whose construction was abandoned  in the 1980s, is supposed to be online by 2011 and become the country’s third nuclear plant after Atucha I and Embalse. COMMENT: The impact of the global financial crisis on state coffers will determine when Atucha II comes online.

PERU/ENERGY EFFICIENCY

Energy regulator, Organismo Supervisor de la Inversion en Energia y Mineria (Osinergmin), published a draft law that aims to bolster the efficiency of gas usage in Peru, writes state-owned news agency Andina. The new law aims to increase gas-consumption efficiency by power plants. Some analysts believe that the power crisis last year and surging gas consumption is due to cheap wellhead prices, which are at $1-$2/million BTU. Low gas prices encourages consumption at the cost of efficiency, according to some energy observers in Peru. COMMENT: One of the biggest questions is how this plan will work in practice. Offering cheap gas tariffs to the domestic market is a sensitive political issue in Peru that the government does not want to face head on.

BRAZIL/ECONOMY

After suffering an abrupt downturn, the Brazilian economy appears to have reacted well to government measures to inject liquidity to banks with industry seeing an improvement in sales, according to Central Bank president, Henrique Meirelles, who is quoted by Santiago daily La Tercer/Reuters. “There is no doubt that there are encouraging signs that the Brazilian economy is recovering,” he said. The economic downturn in Brazil can be seen directly impacting gas consumption. Industry and thermal plants, which consume the lion’s share of the country’s gas, saw usage nosedive in February by 27.7% to18.377 million cu m/d and by 65.1% to 5.312 million cu m/d, respectively, according to gas association Abegas. In Brazil’s industrial southeast region, which comprises of the states of Sao Paulo, Rio de Janeiro, Espirito Santo and Minas Gerais, consumption plummeted by 38.2% to 23.567 million cu m/d during the month under review. COMMENT: March gas consumption figures will reveal if the Brazilian economy is seeing signs of a recovery. There is still no light, however, at the end of the recession tunnel.

BOLIVIA/ROYALTIES

The plunge in global energy prices and lower export volumes to countries such as Brazil, will not force gas-rich Tarija to see a fall in IDH royalties (see South American Energy Markets Daily Roundup, April 14 & 15, 2009), a tax-scheme created in 2005 from the new hydrocarbons law, writes state-owned news agency ABI. Vice President Alvaro Garcia Linera said that IDH revenues to Tarija department will oscillate in 2009 between 560 and 570 million bolivianos ($80-$81 million/€61-€62 million) compared with 554 million bolivianos last year. He said that Tarija received 182 million bolivianos in IDH funds in 2005, a year before the MAS (Movement Towards Socialism) government took power in January 2006. COMMENT: Expect many of these types of comments by the government during an election year, with the latter playing up the situation, while the opposition complains about how much IDH funds have fallen under President Evo Morales’ government.

These briefs can be reprinted as long as the source is cited.

If you have any feedback on today’s articles, or if there are energy industry stories you think should be covered, or need research assistance, please contact etessieri@latamreport.com.

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