ENAP reducing stake in Cerro Pabellon geothermal project

Harsh environment near Cerro Pabellón project site, Chile (source: Ormat)

Alexander Richter 5 Nov 2015

Chilean state-owned oil company Empresa Nacional del Petroleo (ENAP) reduces its share in the 48-MW Cerro Pabellon geothermal project to 20% to maintain focus on its core business, as reported today from Chile. Enel Green Power as the majority shareholder in the project will hold the remaining 80%.

In July, at the start of construction, it was reported that ENAP will hold 49% in the project, while Enel Green Power Chile would hold the remaining 51%. With a decrease in financial contribution to the project, the stake of ENAP has since declined to about 20% in the project.  While participating in additional investments, the company is reducing its participation, as confirmed by general manager Marcelo Tokman.

He explained that the decision is “very consistent with what we see as our role.”  For ENAP, it was never the plan to own the project, but rather support introducing new energy technologies, and raise awareness for the industry.

“In the current energy market, we are focusing on viable projects, while looking for a major partner so ENAP does not have to divert resources and divert from its main line of business. So retaining a share of about 50% in the project is not required and decreasing the stake allows ENAP to allocate resources to traditional business lines of the company.”

In this context, under the agreement with Enel Green Power Chile, ENAP will provide the necessary “minimum” contributions to develop the project at the time and analyze additional contributions as required.

However, sources within the government say that the position of ENAP has generated tension between the two companies, especially the high cost of the project and the prices reached last tender.

With a planned installed capacity of 48 MW, geothermal project requires an investment of approximately US $ 320 million, resulting in US $ 6.6 million per MW. The figure is well above the actual costs of investment. According to a report of the National Energy Commission (CNE), power generation plants in Chile require an investment on average of US $ 3 million per MW – including the ports necessary for the handling and storage of coal, and the costs of environmental mitigation equipment; US $ 1.3 million in the case of a combined cycle project; US $ 3.4 million for hydroelectric passing; and between US $ 2.3 and 2.1 million per MW for wind and solar photovoltaic power plants.

This is especially noticeable when you consider that in the last tender for regulated customers the average was US $ 79.3 per MWh, about 26.7% lower than the average price of the contest of 2014 and a project like this could make them profitable prices close to US $ 100 / MWh.  Cerro Pavilion, located in the commune of Ollagüe, will be the first geothermal power plant in South America and the first geothermal built at an altitude of 4,500 meters above sea level. It is estimated that the project will be operational in the first half of 2017.

Source: Pulso