Energy generation and transmission tenders guarantee stability for investors

Mario Alberto Naranjo Echeverri, General Manager Electric Company of Guatemala SA, (EEGSA), provides vision after the tender of the PEG-5.

The manager talked with Free press and raised country expectations and the results of the interest that can be expected from potential investors.

From the perspective of an investor, how do we understand the launch of the PEG-5 tender?

It is a set of opportunities. First Guatemala has been doing a good job in terms of attraction of foreign investment and local investment, because there are many projects in which there is a reinvestment of the companies that are already.

The second is that there is a legal framework of the electricity sector in particular, which is a stable framework that meets the General Electricity Law and marks a very clear spine and rules of the game that provides certainty for investors to want to invest in the country.

And for businesses to electricity generation?

A very important element is that contracts are made directly with distributing companies; This guarantees the signing of the contracts, the payment is guaranteed, because it is also the generation that is needed to be able to meet the current demand and the future that has been growing every year.

Being 15 -year contracts, it allows a mix between different technologies, between new projects or with existing ones or projects that can be completely new, and that provides peace of mind to investors to know that their return period of the business plan that structures is guaranteed.

What are the scenarios?

There are two possible scenarios: the first, is that there are possible investors, who have already been studying Guatemala and the regional market that is already present. The capitalist who already knows him was waiting for this tender and it is possible that he already has very structured projects or at least on portfolio that will be ready to take this opportunity.

The second is that there are investors who are seeing the information that comes to them, but in the end each of the investors knows the risks of the business; And those who participate in the generation know him.

In this initiative and those who are going to participate, it gives them a waiting framework, because the projects will enter between 2030 and 2033 allows them to finish structuring the projects participate and know that with the premise of a contract signed with the distributors that plan becomes fully financed by many organizations including local banking, which makes it viable.

What was shown and the long -term vision of country stability, the vision of demand growth that allows an investor who is barely arriving, understanding that he can structure and have the time of the projects to guarantee the entry to the local market.

That is, there are two macro visions or what would the reading be?

In the terms of the tender and in the schedule it allows a generation project to be structured with different technologies that can be developed, once awarded in the auction and at least the date of construction from the date of four to five years.

Is there a good margin?

That is why when the risk of the investor who knows the generation business knows that, depending on technology, there are projects that can be executed much faster, but there are also affordable technologies in the market.

What must be considered in certain cases, are licensing times, permits for projects that are some factors.

What does Guatemala’s energy transition respond with this bidding event?

We are in energy transition as a country for several years; When today, the generation matrix is ​​more than 70% with unconventional renewable and renewable sources, we are one of the countries in the region with a greater component of renewable and renewable energy unconventional.

Now we continue in that same line that the projects that arrive can attract new sources and new projects with renewable energy, but that they are also competitive projects of what we are looking for with distribution and guaranteeing a fee that customers can pay them.

How do you analyze betting on natural gas?

It is something new, in projects of a certain scale for Guatemala. Remember that in the PEG4 about two years, a project with natural gas was awarded, its own sources in Petén that has been executing and developing that it must begin operations in the following years.

But the arrival of technologies, for example, with a bit of greater natural gas scale are possible in this tender that is seen as an energy in terms of transition.

In the future, how will the energy matrix be composed?

It is a complex question, but I believe that the matrix will continue to have very similar to the one between 70% and 80% of unconventional renewable and renewable, why? Although new generation will enter, new demand will also enter and in that sense there is a staggered growth between the different technologies (of generation) and there we have important actors and plants in the country that work with fuels and non -renewable energy that also make the power and the generation base that is needed.

On the horizon, are there potential investors for this tender?

I think so and based on two elements: the first thing is that in this call there were 300 people from the first informative round of the PEG5 that demonstrates the interest of many actors.

The second that we have attended requests and meetings with multilateral agency, cooperation banking, investment banking, signing legal and corporate that have wanted to explore the issue that shows that there is interest in participating and financing generation projects in Guatemala.

What is the preliminary estimate?

Combined between generation and transmission US $ 5 billion of investment that is an attractive issue. We talk about US $ 4 billion for generation and US $ 1 billion in transmission.