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Caroline Voulminot Andrés Mesa Francisco Jiménez Rafael Uribe

Caroline Voulminot Andrés Mesa Francisco Jiménez Rafael Uribe. Agenda. Hidroaysen project Environmental Issues Rationale for the project Financial considerations Conclusions. Hydroelectric energy project located in Chilean Patagonia. 2,750 MW Installed Capacity

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Caroline Voulminot Andrés Mesa Francisco Jiménez Rafael Uribe

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  1. Caroline Voulminot Andrés Mesa Francisco Jiménez Rafael Uribe

  2. Agenda • Hidroaysen project • EnvironmentalIssues • Rationalefortheproject • Financialconsiderations • Conclusions

  3. Hydroelectric energy project located in Chilean Patagonia • 2,750MW Installed Capacity • 1,250miles Transmission line • $10BInvestment • 2Rivers • 5Dams • 90%of Chileans benefit • 12Years to construct • 2Shareholders • Generation project approved • Transmission line not approved Baker 1 Baker 2 Pascua 2.1 Pascua 2.2 Pascua 1

  4. A non-utilized five-star energy resource… • Hidroaysen total installed capacity implies: • 7coal-fired power plants displaced • 16MCO2 reduced emissions • Hidroaysen is (one of) the most efficient hydroelectric project in the world • 3.12 GWh/Flooded Ha efficiency • 78% plant factor • Competitive prices • Chilean renewable energy • Reverse Caudal • Low caudal variation • Low caudal oscillation • Few aquatic life • No displaced communities

  5. Agenda • HidroAysén project • Environmental Issues • Rational for the project • Financial considerations • Conclusions

  6. A violent attemp against Chile… • Native Flora and Fauna at risk • Landscape forever damaged • Local communities affected • Energy will not stay in the communities • Intervene one of the most pristine sites in the world • Tourism affected • Profits of this project are for private transnationals and not for Chileans

  7. Hidroaysen – ‘not cool’ 2010: “The question is not whether the damns will be built, it is how” 2011: “No project is indispensable “Hidroaysen is not viable”

  8. Agenda • HidroAysén project • Environmental impacts • Rationale for the project • Financial considerations • Conclusions

  9. Desperate energy needs • 2X. Electricity demand is duplicating every 10 years. • 67% of electricity resources are: • Imported. • dependent on commodity prices.

  10. Soaring prices  Chile is losing competitiveness • >140 $/MWh in Chile vs. <70 $/MWh in US. • Diesel is base-load capacity • Long-run expected marginal cost is more than twice higher than that of Peru, Colombia, Brazil, Argentina, etc

  11. Agenda • HidroAysén project • Environmental impacts • Rational for the project • Financial considerations • Conclussions

  12. Financial assessment is not straightforward FCFU • 16.1% Project IRR • 19.4% Equity IRR • Is this enough? • What is the correct discount rate to be used? 10%, 50%? • How many discount rates shall Hidroaysen use? • Other considerations: • Is this project financeable? • Shall Hidroaysen include a partner for the transmission portion? Construction Operations Development Terminal Value is $40 billion

  13. Agenda • HidroAysén project • Environmental impacts • Rational for the project • Financial considerations • Conclusions

  14. Should Colbun and Endesa continue pursuing Hidroaysen • Endesa Chile: $13 billion Market Cap • Colbun: $5 billion Market Cap • Next Hidroaysen board meeting is next week: • You have already spent $500 million • $200 million more to know if transmission project is approved • What should Bernardo Larrain do? What would YOU do? Please access: pollev.com/finance663

  15. Aftermath • Colbun decided to halt the project: • “Colbun will not commit further development costs until having more clarity about the country’s policy in regards to hidroaysen” • Endesa followed-suit a couple of months later • Pinera’s term ends next month and Bachelet will assume power. • Will this project ever be made?

  16. Q&A

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