Panama's $356 Million Hydro Projects to Earn Annual $11.5 Million Carbon Emissions Reduction Bonus

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Researched by Industrialinfo.com (Industrial Information Resources; Houston, Texas). Projects in Panama totaling $356 million will add 173 MW of power generation capacity, equivalent to 12.5% of country's current total of 1,385 MW. All the projects will produce hydroelectric power, which already contributes over 50% of Panama's total, with thermal power contributing just over 49%. The fractional balance is made up of renewable energy sources.

The Italian company Geodata (Turin) is forming a joint venture (JV) with the local company Alternegy (Panama City) to execute the civil engineering part of the engineering, procurement and construction (EPC) contract on two projects. Both the 36 MW Lorena and the 54 MW Prudencia projects are to be developed on sites on the Chiriqui River, downstream from the 125 MW Rio Esti hydropower plant, which is operated by AES (NYSE:AES ) (Arlington, Virginia). Investment in Lorena will be $80 million and in Prudencia, $114 million.

Alternegy's central mission is to provide non-thermal sources of power, and this is matched by Geodata's experience in providing the civil engineering base for leading edge energy projects. The projects will be Alternegy's first local plants after its formation in 2003 with 100% Panamanian capital. Geodata has a company based in Caracas, Venezuela, which specializes in the requirements of the Central and South American markets. In terms of the JV agreement, Geodata will raise the total $194 million of the projects' costs and will be responsible for the operation of the hydropower plants.

With the final agreement between the two companies scheduled to be finalized before the end of June, Alternegy has scheduled construction to begin in December 2005. Both projects will develop in parallel and should be completed by the end of 2007.

Towards the end of June, Alternegy was also discussing the development of the civil engineering portion of the EPC contract for the 83 MW Lalin hydropower project with an unnamed European company. The $162 million project, on the Gatu River in Veraguas province, will be built in three stages of 39 MW, 25.4 MW, and 19.5 MW. As with the other two projects, the company is looking to its JV partner to finance 100% of the Lalin project, on which construction is scheduled to start in 2006.

The EPC contract for the electromechanical section of all three projects has been signed between Alternegy and the Brazilian-based company Energ Power. The company plans to sign power purchase agreements (PAAs) for all the power generated by the three projects with either the local Elektra Noreste or Union Fenosa (OTC:UNF ) (Spain), owners of domestic power distributors Edemet and Edechi.

Elektra Noreste has already called for bids for 120 MW of power supplies in 2006-2008 and will open a tender in October for 200 MW of supplies from 2009-2018. The two distribution companies have opened a combined tender to supply 4450 MW of electricity in the same ten-year period.

Anam, Panama's environmental authority, has approved all three projects as clean development mechanism (CDM) projects, BNamericas reported. Approval has been given for the sale of 700,000 tons of carbon emission reductions (CER) per annum for Lorena and 1.080 million tons of CER for Prudencia. The company is hoping to receive $6.50 for each CER sold, for a total of $4.5 million per annum, from Lorena’s operations and over $7 million per annum from Prudencia.

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