Norway's SN Power to Develop $300 Million, 168-Megawatt Cheves Hydropower Project in Peru

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Researched by Industrial Info Resources (Sugar Land, Texas)--International hydropower company SN Power (Oslo, Norway) recently was granted a concession to develop the Cheves run-of-river hydropower project in the Oyon and Huaura provinces, north of the Lima region in Peru. SN Power is the fourth-largest private power-producing company in Peru and was selected to develop the project after an international bidding process. The project involves an investment outlay of about $300 million. Construction of the 168.2-MW power plant is slated to begin in 2010, and the plant is expected to be operational from July 2014.

Under the terms of the contract, SN Power also will build a 220-kilovolt (kV) transmission line to transport power generated from the plant to a substation nearby. According to Peru's Energy and Mines Minister Pedro Sanchez, the Cheves power project would lead to a reduction in pollution equivalent to removing 250,000 vehicles from Peru's roads.

President Alan Garcia of Peru was present at the signing ceremony and said that Peru will have increased its power generation capacity 50% by the time his term expires in 2011. He said that Peru could become one of the lowest-polluting nations in the world, since the addition of power generation capacity is not being based on fossil fuels alone, but on more environmentally friendly sources, such as hydropower. He said that, like Norway, which has a massive hydropower generation capacity, Peru intends to become a large power supplier in South America. He indicated that other international companies could invest in environmentally friendly power projects in Peru. He encouraged private companies to invest in developing dams and generating power for domestic consumption as well as for export to the neighboring nations of Brazil, Ecuador and others.

In September 2009, Centrais Eletricas Brasileiras S.A. (NYSE:EBR) (Electrobras) (Brasilia, Brazil), the state-controlled holding company that is engaged in the power sector, announced plans to develop five power projects in Peru with a combined generation capacity of 5,000 MW. Electrobras has indicated an interest in acquiring a Peruvian energy company in order to bid for two dam projects in Peru.

In early November 2009, Peru signed a preliminary agreement with the government of Ecuador, in which Peru will sell 1,200 MW of electricity per hour everyday to help Ecuador tide over its prevailing power crisis. For additional information, see related article from December 9, 2009 - Ecuador Facing Major Energy Crisis. Under the terms of the contract, Peru will export surplus power to Ecuador until the end of April 2010 for an approximate payment of $52 million. Peru has contractual agreements with several private power generators that can provide power in case the country faces a sudden shortfall.

In April this year, power company Globeleq (London, England) announced that it would construct the 336-MW natural gas-based Kallpa power plant, near Lima, to help Peru meet its growing demand for power. The plant will be set up in two phases and will source natural gas feedstock from Peru's Camisea gas field. A third phase will convert the plant to a combined-cycle plant, which will increase its efficiency and capacity to a possible 840 MW.

The government of Peru has set a target of generating one-third of its power from fossil fuels by 2011, another third would be based on natural gas, and the remaining from renewable energy sources. At present, about 81% of Peru's power is contributed by hydropower. About 5% of the commercially available power is expected to be sourced from wind energy. Peru reportedly has 28 of the 32 climate pointers necessary to generate wind power and the country's coastline has the potential to generate more than 65,000 MW of wind power. The government has announced several incentives to encourage private investment in renewable energy sources.

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