SANTIAGO--Amid legal delays and rising animosity against planned
electricity projects in Chile, power companies are concerned the
country's environmental permitting framework is falling behind and
called on the government to take measures to ensure supply meets
growing demand.
Chile's need to double its current 15,000-megawatt installed
capacity over the next decade was put at risk after the Supreme
Court recently halted the 2,100-megawatt, $5 billion Hacienda
Castilla power project and modified the environmental approval
timetable for the 640-megawatt Cuervo power plant, led by Origin
Energy Ltd (ORG.AU) and Xstrata PLC's (XTA.LN) Energia Austral.
Speaking at an energy seminar, the chairman of power generator
Colbun (COLBUN.SN), Bernardo Larrain, said that politics and the
courts bypassed the governmental environmental authority, which
usually had the final word on energy projects.
Some projects "got to the Supreme Court and we have to ask
ourselves why those projects' problems weren't solved within the
country's environmental permitting framework," Mr. Larrain
said.
Environmental groups opposing larger projects have filed suits
against them, leading to delays and even possible suspensions,
which increase generation costs in the near-term and put energy
supply at risk in the longer term.
Chile already has some of the highest power generation costs in
the region as its energy matrix has had to turn to more expensive
fuels, such as liquified gas, coal and diesel as drought conditions
in recent years have curbed hydrogeneration.
"It's more of a political issue than a technical issue," Mr.
Larrain said, adding that "non-market" issues have been clouding up
the environmental permitting process.
"In the business environment, you can say that companies are
still investing, but the problem is now in the non-market context,"
Mr. Larrain said.
Joaquin Galindo, chief executive of power producer Empresa
Nacional de Electricidad SA (EOC, ENDESA.SN) added that power
projects are now taking ten years to develop and the permitting
process takes up half of that period.
French-Belgian energy company GDF Suez SA (GSZ.FR) country
manager Juan Claveria, meanwhile, admitted difficulties in
obtaining environmental authorities' approval.
"The projects' approval process is worsening and it is becoming
more difficult and riskier for power companies to develop projects
in Chile," Mr. Claveria said.
On top of the recent Supreme Court rulings, President Sebastian
Pinera in 2010 halted a 540-megawatt thermal power project by GDF
Suez by asking the company to relocate it because of its proximity
to a nature reserve, even though the generator had already received
environmental approval.
Chile's 2,750-megawatt HidroAysen energy project, meanwhile, is
being delayed by shareholders Colbun and Endesa as they await an
electricity transmission bill the government recently sent to
Congress for approval.
Once the bill is approved, HidroAysen is expected to submit the
environmental impact study for its $4-billion transmission line as
it already received the environmental green light for its
$3-billion generation project.
If the country fails to meet growing demand, its productivity
and possibly its growth could be at risk in coming years, the
governor of the central bank recently warned.
Moreover, several mining projects, such as the expansion at
state copper giant Corporacion Nacional del Cobre de Chile's
Salvador division, could be put on hold if power projects continue
to see delays.
"It's very clear that if there's no energy, there's no
development," Mr. Galindo said.
Write to Graciela Ibanez at graciela.ibanez@dowjones.com
--Carolina Pica contributed to this article.