A Glance at the Energy Matrix up to 2025

Transcription

1 A Glance at the Energy Matrix up to 2025 Presentation Colegio de Ingenieros Sebastián Fernández C. Energy Planning Officer June 2009

2 Table of Contents I. Evolution of the Electricity Market in Chile. II. III. IV. Current context, energy perspectives and economic growth. Something about Endesa Endesa s response to Chile s energy needs. V. Conclusions

3 Towards 1996 the Entrance of Natural Gas marked a milestone in the development of the electricity sector Stable regulation and growing demand motivated long-term investments. The new technology of combined cycles presented a favorable scenario for the electricity supply in the medium and long-term (2 Gas pipelines). An increase of efficiency and the availability of energy was expected. The combined cycles assured an optimum use of hydro resources. A substantial drop of electricity supply prices was foreseen, given oversupply of energy. No one doubted the stability of the Argentine gas supply. Three large thermal-electric generation projects were developed. 379 MW 370 MW 370 MW Nueva Renca (GENER) San Isidro (ENDESA) Nehuenco (COLBUN) Additionally, there were other important projects for 332 MW Hydro and 195 MW Thermal, all of them operating today, of which standing out are: Tal Tal (120 MW-NG) and Petropower (75 MW-Diesel). Rucúe (170 MW) and Ibener (124 MW), both Hydroelectric Generation.

4 The Drought, the worst over the past 40 years, changes the optimistic scenario. The effect of the entrance of generation projects is neutralized and a deficit of energy in the system is produced. The delay of Generation projects with Natural Gas forces an anticipated use of hydro resources, leading to a reduction of reservoir levels. Situation aggravated due to Incorrect Economic Signals Node Prices reach historic minimum ENDESA invests US$ 180 m in 588 MW (turbines). Mg costs reach historic maximum. Strong losses for the generators. Changes in Electricity Law Article 99 BIS is replaced. Drought is not force majeure. Equal rationing and compensation. Main consequences Major Market Risk Supply of electricity distributors deserted RM-88 arises which forces Generators to supply distributors with no contracts. Regulatory uncertainty (Tolls). Generation projects are suspended and/or postponed.

5 After the drought the focus was on NG, but the crisis of the Argentine supply changed the Chilean energy matrix completely After investing more than US$ 2 billion to adjust the electricity development to the Argentine NG, Chile had to totally reconsider its future development and regulatory framework, and had to reassume its hydrological development and expensive thermal generation for back-up. SING Norandino: 5.0 m M3/day Gas Atacama: 5.0 m M3/day Installed Cap. C.C.: 1,432 MW Investment: US$ 720m % Installed cap. System: 49% Gx Projects Plan SIC before gas crisis gas (Oct03) Hydro NG Interconnection Argentina RNCE Node Pr. (US$/MWh) Gas Andes: 9.5 m M3/día Gas Pacífico: 3.5 m M3/día Gx Projects Plan SIC January 2009 SIC Installed Cap. C.C.: MW Investment: US$ 811m % Installed cap. System: 19% Hydro Coal RNCE Diesel Methanex: 5.25 m M3/day Since tariff fixed in April 2005, power plants with Argentine NG disappeared. LNG and coal technology emerge in the MT and LT.

6 GWh 4,000 3,500 3,000 2,500 2,000 1,500 1,000 Jan-96 Jul-96 Consequently, since 2004 onwards, the system experiments a sustained increase of node prices in the SIC Demand growth and evolution node prices; period Jan-97 Sales SIC Node Price Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Since 2007, the price increase was higher due to extreme cuts of the Argentine gas, to the strong increase in prices, and a more expensive generation matrix (future LNG, Coal, Crude Oil). Up to mid 2007, the increase in prices did not affect the growth in demand, which remained at a rate of approximately 6% per year. Since the end of 2007 there was a decline in the demand growth, coinciding with a strong increase of the node price from approximately US$ 60/MWh to over US$ 100/MWh. In 2008, the demand growth was -0,9%. In 2008 we observed a reaction from the consumers given the intense energy efficiency and savings campaign promoted by the authorities, generators, distributors and others US$/MWh

7 Table of Contents I. Evolution of the Electricity Market in Chile. II. III. IV. Current context, energy perspectives and economic growth. Something about Endesa Endesa s response to Chile s energy needs. V. Conclusions

8 There is a stable environment and regulation, nevertheless the adaptation of the Chilean energy matrix is still in process Energy tightness due to the delay of investments during Gas from Argentina is almost nil. Volatility of the oil price. LNG is arriving soon. Large thermal-diesel capacity (1,000 MW between ) Effects in the industrial activity and therefore in the economic growth.

9 The replacement of gas to diesel has led to significantly higher electricity generation costs Generation Cost limited since 2004 up to December 2008 Situación en el SIC With Gas: US$ 1.3 billion With Diesel US$ 5.9 billion In other words: The gas restrictions have led to additional costs for US$ 4.6 billion. In 2008, for Endesa, the over-costs exceeded US$ 680 million.

10 The country and electricity companies are absorbing and facing a tremendous industrial and economic effort This is unnoticed There s always energy.. There s always light. The 2008 over-cost itself, which was app. US$ 1.9 million, is equivalent to: The annual consumption cost of half of a million cars (62% of Chile s industry) Construction and equipment of 7 modern and high complex hospitals (like the new military hospital in La Reina) The cost of 47,000 houses worth UF 1,000 each Twice the construction cost of the Vespucio Oriente highway of 11 kms in mining tunnel

11 Energy Matrix of transition The energy matrix which we count on today reflects: Argentine fuel problems and high dependence on diesel the delay, due to various considerations, of efficient projects: hydro projects in the pipeline of investments coal projects

12 And still need to significantly improve the generation mix towards more efficient technology than diesel Generation, TWh Generation SIC Apr09-Mar10 Renewable 4% Diesel 10% Coal 16% Reservoirs 42% Gas 1% Run-of-the-river 27% 50 Generation SIC Hydrological Year 2011 Generation, TWh Renewable 5% Gas 6% Coal 22% c Diesel 2% Reservoirs 38% Run-of-the-river 27% Hydrology Run-of-the-river reservoirs coal gas diesel Renewable ffailure res+run of river

13 Future Investments Conditioned Global environmental requirements Global warming World trend to reduce CO2 emissions Obtaining of carbon credits, eventual increase of generation cost with coal. Chile Governmental promotion of Non-Conventional Renewable Energy Joined the OCDE (Organization for the Cooperation and Economic Development Country risk Regulatory system Chile has good possibilities to invest

14 2025 Energy Matrix Considerations Take advantage of hydrological resources. Work on potential renewable non-conventional energy. Expansion with thermal generation whenever necessary. In the LT all available options have to be considered: expansion of LNG and coal but with more environmental and emission reduction requirements that will imply a higher cost. Endesa was the only generation company that has committed to and invested in the development of the re-gasification terminal in Quintero.

15 We need energy but not any type Key criteria proposed to expand and manage the mismatch between supply and demand. SAFETY EFFICIENCY ENVIRONMENT SUPPLY HYDROLOGY - PRICE INVESTMENT AND OPERATING COST TARIFF FLEXIBILITY LOCAL AND GLOBAL IMPACTS Endesa wants to be part of the solution to this problem, prioritizing hydroelectric projects, in the framework of the country s commitment: National energy independence Efficiency and tariff Flexibility Sustainable Development Renewable energy Current and Competitive Technology Contribution to Regional and Community development

16 Table of Contents I. Evolution of the Electricity Market in Chile. II. III. IV. Current context, energy perspectives and economic growth. Something about Endesa Endesa s response to Chile s energy needs. V. Conclusions

17 Main private operator in Latam COLOMBIA Installed Capacity Line of Business: 15,666 MW Installed Capacity 2,895 MW Number of power plants: 11 EBITDA 2008 US$2.2 bn PERU BRAZIL Installed Capacity 1,467 MW Number of power plants: 9 Delegated Administration: Eepsa: 130 MW Delegated Administration: C. Cachoeira 665 MW C. Fortaleza 322 MW CHILE Installed Capacity 5,284 MW Number of power plants: 25 Gas Atacama 780 MW ARGENTINA Installed Capacity: 3,652MW Number of power plants: 5 Delegated Administration: Dock Sud 870 MW

18 Endesa in Chile Endesa Chile and its subsidiaries in Chile operate and control, as of December 2008, 25 power plants, with an installed capacity of 5,284 MW. (70.7% hydro, 28.9% thermal, and 0.4% wind power). HYDROELECTRIC POWER PLANTS N power plants: 16 Installed Capacity: 3,461 MW THERMAL POWER PLANTS N power plants: 8 Installed Capacity: 1,414 MW WIND POWER PLANTS N power plants: 1 Installed Capacity: 18 MW

19 Endesa is leader in Chile Endesa is leader in terms of market share in Chile (48% SIC, 16% SING). Endesa faces the development of the energy industry in Chile considering the following factors: the structure of the energy matrix in the country the level of dependence on foreign supply reliable energy supply commitment with the environment

20 Future energy supply and prices depend upon the changes in the energy matrix in Chile Liquid Thermal 42% 2009 Coal 9% NCRE 2% Hydro 47% Liquid Thermal 35% 2013 NCRE 4% Coal 17% Hydro 43% Liquid Thermal 29% NCRE 9% Carbón 16% 2020 Hydro 46% Hydro capacity would maintain in nearly 50%. Diesel generation would strongly decrease. Coal generation a would decrease to nearly 22%. Between US$ 1.5 billion average per year will be the cost for the country of the replacement of gas restrictions with diesel and LNG Between US$ 490 million average per year will be the cost for the country of the replacement of gas restrictions with LNG and coal Demand in the SIC y SING Reserve Margin Relationship of prices SIC Non-regulated Regulated Spot 210,9 US$/MWh ,03 29,55 41,05 50,14 52,0 113,9 108,9 83,2 67,0 96,2 91,8 89,0 74,8 82,5 71,1 72,7 86,8 75, ,9 Energy prices. Regulated and unregulated sales of Endesa. 43,5 57,7 57,4

21 Table of Contents I. Evolution of the Electricity Market in Chile. II. III. IV. Current context, energy perspectives and economic growth. Something about Endesa Endesa s response to Chile s energy needs. V. Conclusions

22 Strong investments in the development of new generation projects Hydroelectric projects will contribute with approx. 3,400 MW of new capacity: PALMUCHO 32 MW hydro Oct-2007 LOS CÓNDORES 148 MW hydro 4Q-2013 NELTUME 473 MW hydro 4Q-2014 AYSÉN 2,750 MW hydro 2013 onwards Source: Endesa Chile

23 Strong investments in the development of new generation projects Thermal projects will contribute with approx. 1,100 MW of new capacity: BOCAMINA II 370 MW coal 4Q 2010 SAN ISIDRO II Jan.08: 350 MW CC diesel Jul-09: 377 MW CC LNG QUINTERO 2010: LNG TALTAL Conv. 120 MW diesel/gas Mar-2008 Energy projects - ECO 95 MW: CANELA MW wind Dec-2007 Source: Endesa Chile CANELA 2 60 MW wind Nov-2009 OJOS DE AGUA 9.5 MW mini-hydro Jun-2008 PIRUQUINA 7.6 MW mini-hydro 4Q 2012

24 Projects under construction Quintero Thermal Plant MAIN CHARACTERISTICS: Capacity : 250 MW (2x125 MW) Type of plant : Open-cycle thermal plant Fuel : Diesel Oil/LNG LOCATION Located in Quintero, Fifth Region of Valparaíso. DESCRIPTION The project consists in the construction of a thermal plant located alongside the Quintero re-gasification plant (GNL Chile). The plant will operate in open cycle with diesel oil until LNG is available, being possible to close the open cycle in the future. This thermal plant will connect to the SIC in the Patio de Alta San Luis (San Isidro plant). TIMING Start-up is planned for June, 2009.

25 Projects under construction Canela II Wind Farm (Endesa Eco holds 75% share) MAIN CHARACTERISTICS Capacity : 60 MW Average generation/year : 137 GWh Type of plant : Wind farm Wind generators : 40 units of 1.5 MW each LOCATION Located in Canela, Fourth Region of Coquimbo. DESCRIPTION The project consists in the construction of a wind farm of 40 wind generators, to be installed in the south of the existing wing farm Canela I, on a 1,082 há and located in Canela, Fourth Region, 80 Km. north of the city of Los Vilos. The plant will connect to the SIC in the SS/EE Canela, under construction. OTHER CONSIDERATIONS Will contribute to the requirements of the NCRE law (10% of the energy contracted starting from 2010). Commitment of Endesa with the environment through the development of NCRE projects. Carbon credits. TIMING Start-up is planned for November, 2009.

26 Projects under construction Expansion of the coal-fired thermal plant Bocamina MAIN CHARACTERISTICS: Capacity : 370 MW (1 unit) Average generation/year : 2,128 GWh Type of plant : Coal-fired thermal Fuel : Pulverized bituminous coal LOCATION Located in the Eighth Region of Bío-Bío, province of Concepción, Coronel. DESCRIPTION The project consists in the construction of a coal-fired thermal plant, alongside the existing Bocamina plant, using pulverized bituminous coal as fuel. This plant will connect to the Central Interconnected System (SIC) through a S/E located in the Lagunillas area, which is currently being developed by Transelec. TIMING Start-up is planned for 4Q2010.

27 Projects under study Piruquina mini-hydroelectric plant (Endesa Eco) MAIN CHARACTERISTICS Capacity : 7.6 MW. Average generation/year : 30.4 GWh Flow : 32 m3/s Net height : 27 m Type of plant : Pass-through mini-hydro plant LOCATION Located in the Tenth Region of Los Lagos, province of Chiloé, near Dalcahue, located 17 Km. north of the city of Castro. DESCRIPTION The project consists in the construction of a 7.6 MW pass-through mini-hydro plant in the main island of Chiloé. It will use the waters of the river Carihueico, with a flow of 32 m3/s. This plant will directly connect to the distribution system of Chiloé. OTHER ASPECTS Will contribute to the requirements of the NCRE law (10% of the energy contracted starting from 2010). Commitment of Endesa with the environment through the development of NCRE projects. Carbon credits. TIMING Start-up is estimated for 4Q2012.

28 Projects under study Los Cóndores Hydroelectric Plant MAIN CHARACTERISTICS Capacity Average generation/year Flow Net height Type of plant : 148 MW : 560 GWh : 25 m3/s : 703 m : Pass-through hydro plant LOCATION Located near the mountain range of the Andes in San Clemente, province of Talca, Seventh Region of Maule, in the Maule river basin. DESCRIPTION The project consists in the construction of a 148 MW pass-through hydro plant, with an average generation of 560 GWh/ year and uses the 765 meters altitude difference between the Maule Lake and the confluence of the river Maule with the Las Luces stream, through a 16 km. mixed conduction (tunnel and pressure canal). The plant will connect to the SIC through the S/E Ancoa. TIMING Star-up is planned for 4Q 2013.

29 Projects under study Neltume Hydroelectric Plant MAIN CHARACTERISTICS Capacity : 473 MW Average generation/year : 2,207 GWh Flow : 140 m3/s Net Height : 386 m Type of plant : Pass-through hydroelectric plant LOCATION Located in the Fourteenth Region of Los Ríos, 115 Km. east of the city of Valdivia and 40 Km. south-east of the city of Panguipulli, in the basin of the Valdivia river. This hydro plant takes advantage of the energy potential of the rivers Pirehueico and Neltume. DESCRIPTION The project consists in the construction of a 473 MW pass-through hydro plant at the junction with the Fui and Neltume rivers. The connection to the SIC is in double circuit in 220 KV from Neltume plant to the S/E Loncoche (the final line from the Pullinque area to Loncoche is under study). TIMING Start-up is planned for 4Q 2014.

30 Aysén Project Description of the generation project The 2005 study comprised the construction of 4 plants in the rivers Baker and Pascua, with a total installed capacity of 2,430 MW, the expected generation was 18,090 GW/year and the reservoir area was 9,300 ha (3.8 ha/mw). In order to decrease the environmental impact, the project was revised, and in 2007 a new solution was released: the building of 5 power plants, a total capacity of 2,750 MW and the expected generation was 18,430 GWh/year. The new solution reflects the company s efforts to reduce the flooded area to 5,910 ha (36% vs. the 2005 project and 80% vs. the 1998 project) and also to increase the estimated generation of electricity Conceptual Study Plant Capacity Generation Flooded Area/Capacity MW GWh/year Area (ha) ha/mw Baker ,030 2, Baker ,600 5, Pascua , Pascua , Total 2,430 18,090 9, Revised Project Plant Capacity Generation Flooded Area/Capacity MW GWh/year Area (ha) ha/mw Baker , Baker ,540 3, Pascua , Pascua , Pascua , Total 2,750 18,430 5, % +2% -36% -44%

31 Aysén Project Baker 1 Capacity: 660 MW Generation: 4,420 GWh/year Reservoir size: 710 ha Baker 2 Capacity: 360 MW Generation: 2,540 GWh/year Reservoir size: 3,600 ha Pascua 1 Capacity: 460 MW Generation: 3,020 GWh/year Reservoir size: 500 ha Mini-hydro Río del Salto Plant for the installation of works Capacity: 15 MW Generation: 98 GWh/year Pascua 2.1 Capacity: 770 MW Generation: GWh/year Reservoir size: 990 ha Pascua 2.2 Capacity: 500 MW Generation:3,340 GWh/year Reservoir size: 110 ha Installed capacity (1) 2,750 MW Average energy per year (1) 18,430 GWh

32 Table of Contents I. Evolution of the Electricity Market in Chile. II. III. IV. Current context, energy perspectives and economic growth. Something about Endesa Endesa s response to Chile s energy needs. V. Conclusions

33 Conclusions 1. Diversification of the sources has to be one of the key issues of the Energy Matrix development. Energy integration Energy Dependence 2. New capacity should be less invasive with the environment and energy prices will incorporate these higher costs. Global warming might affect the structure of generation matrix. 3. While generation matrix adapts itself, energy prices should move towards long term equilibrium prices. 4. NCRE will play an important role in the development of the energy matrix. Chile has privileged conditions to develop these sources and will be one of the main pillars of the energy matrix in the long term. As a country, we must take advantage of our best resources and even more if those resources are renewable.

34 A Glance at the Energy Matrix up to 2025 Presentation Colegio de Ingenieros Sebastián Fernández C. Energy Planning Officer June 2009

35 Disclaimer This presentation contains statements that constitute or may constitute statements about the future, as established in the United States Private Securities Litigation Reform Act of Such statements appear frequently in this presentation with statements referring to our intentions, beliefs and expectations, which include, but are not limited to, any statement with respect to: (1) our investment program, (2) trends that affect our financial condition or operating income, and (3) the effects of changes in the regulatory framework for the electricity industry in one or more of the countries in which we operate. As such statements are subject to risks and inaccuracies, the effective results may differ significantly with respect to those expressed or implied in such statements with a view to the future. Such statements should not be unduly relied upon as they only refer to the position on the date on which they were prepared. We assume no obligation to publicly report on changes that might be applied to the statements with a view to the future.