A decade of private investment in the Peruvian energy sector has dramatically boosted output and millions more dollars are being invested this year as demand for power continues to soar. And there is a strategy to export excess capacity to neighboring states.
Electricity generation rose by 4.1 per cent to 20,736 gigawatts in 2001. State-run Electroperu is the largest power provider in the nation, followed by privately-owned Edegel and Egenor.
Electroperu had record sales last year and the government is considering the sale of the company’s Mantaro hydroelectric plant, which boosted output by 0.7 percent last year.

Electroperu executive president Teofilo Casas Rivas sees big potential for energy resources in Peru. “We have hydroelectric resources estimated at 60,000MW and we are only exploiting five percent.”
Edegel plans to invest $23 million this year in new equipment for its hydropower plants and to renew its transmission network. The work will take six months and no profit is forecast until 2003.
The company, which posted 2001 profits of $454 million – 25 percent less than the previous year – supplies the capital, Lima. Spanish giant Endesa has a controlling stake in the company.
Jose Maria Hidalgo Martin-Mateos, director general of Edegel, says seven million Peruvians – about a quarter of the population – are still without electricity. “They are using wood for heating and cooking, and even light. This is very counterproductive for their health, the environment and their quality of life. What is needed is a very strong, identified strategy of rural electrification,” he says.
Electricity distributor Luz del Sur, created when Electrolima was privatized, had a ready and waiting market to satisfy, as general manager Mile Cacic explains: “When we arrived here in 1994, 25 out of every 100 people in Lima lacked access to electricity.

“We were able to reach this market very quickly, and thus increase the amount of electricity we sold and revenues we gener-ated. It took us only four years to achieve 100 percent coverage.”
Peru’s power consumption is still one of the lowest in South America, he adds. The average in Peru is about 700KW per person a year, only a third of the average in Chile or Argentina.
“Another way for Luz del Sur to expand is to acquire more distri-bution or generation companies when they are privatized by the state. The state has to sell these assets and we would have an opportunity to increase our business in the country,” says Mr Cacic.
“Then, of course, there is the possibility of regional interconnections with Brazil – the largest power market – and Ecuador, which is only a short distance.”
The Peruvian government is continuing with the construction of the Yuncan hydroelectric plant. About two-thirds of the 130MW facility has been built so far, and it is due to start operations in July 2004. The government is considering selling the Yuncan project to the private sector in the first half of this year.

There is also potential to boost gas production in the country. Mr Casas says Electroperu will begin work on a natural gas network from Camisea to Lima and Callao later this year. The main pipeline extends for 40 miles, and supply to industrial and domestic consumers will begin in 2004.
“The first deposit of natural gas we found (Camisea) has reserves of 13 trillion cu ft. This figure could double when adjacent dep-osits are confirmed. We are fairly new to natural gas – we hardly consume any at present. These reserves could satisfy our needs for more than a century,” he says.
Mr Casas adds that future developments must be for energy export as Peru’s resources are ample for domestic consumption. “New technology has changed natural gas from being a regional product to an internationally commercial one. We have to have the vision to turn natural gas into liquid gas and create new technologies. The energy sector is going to become very important for the future generation of foreign exchange earnings, which is important for Peru’s development.”

President Alejandro Toledo recently visited neighboring Bolivia with a proposal to allow the landlocked Andean nation to export gas to the U.S. and Mexico via Peru. The southern Peruvian port of Ilo is proposed as the terminal for the 257-mile pipeline.
Mr Hidalgo says the government has created the right conditions for investment in the power sector. Indeed, privatizations and state concessions are expected to raise $1.1 billion this year. The government intends to auction oil refineries, as well as those shares it still holds in power-generation and distribution companies.

The ground is being prepared for the privatization of Petroperu’s refineries and Anglo-Dutch oil giant Shell is not ruling out participation in the sell-off. Petroperu still owns 40 percent of the 102,000 barrels-per-day La Pampilla refin-ery (Spain’s Repsol owns 60 percent) and a 100 percent stake in the smaller Milagro and Colchan refineries.
Petroperu chairman Raul Pasco says: “We have skilled labor, intelligent professionals and many resources that have not been exploited properly. They are waiting for private investors to come and make the changes. The government is working on this and investors will have secure profits, and political and legal stability, which will eliminate the risk factor.”