Chile Face Electricity Crisis: Fitch

Hit by drought and high commodity prices, Chile could be facing a significant electricity generation crisis in the next two years, according to Fitch. Firms like Colbun and GasAtacama, which rely heavily in natural gas or hydro electrical power for generation, signed contracts at prices that did not foresee the current crisis and could see financial flexibility affected, the agency adds. The least affected companies are those that have been using coal as their main energy source, such as Endesa-Chile and Guacolda. Chile has been trying to lessen dependence on Argentine natural gas by modifying existing natural gas fired plants and building new thermal facilities based on alternative fuel sources. Companies are also investing in regasification plants for LNG, and the government is promoting exploration of other energy sources. “These developments combined with the opening of new hydro plants should allow for a drop in generating costs, and electricity prices should come down once the first LNG project is completed in 2009/2010 and at least 1,000 megawatts of coal-based generating capacity comes on stream during that same period,” Fitch says.