AES Gener to withdraw from Chile LNG expansion

AES Gener, the Latin American subsidiary of US utility AES, will withdraw from the planned expansion of Chile's 3.25mn t/yr Quintero LNG terminal ahead of a final investment decision in coming weeks, industry executives tell Argus.

The Santiago-based company, Chile´s top power generator, was among three companies that originally committed to reserving a total of 3.2mn m³/d of regasification capacity at Quintero in a second open season that began in late 2014. By March 2016, only two of the three companies signed non-binding 20-year agreements: Chilean generator Colbun for 1.65mn m³/d and AES Gener for 1.45mn m³/d. The third party in the original group, Israeli IC Power´s Cerro el Plomo, dropped out.

Since then, AES Gener´s priorities have shifted away from its traditional thermal focus, including several coal-fired projects in Chile, toward renewable energy and energy storage. At the same time, the company has been tackling cost overruns and a tense break-up with its mining partner Antofagasta Minerals at the controversial 531MW Alto Maipo hydroelectric project outside of Santiago.

AES Gener´s decision not to participate in Quintero´s second expansion leaves the project with one new capacity holder, Colbun, whose commitment is enough for the Quintero shareholders, led by Spain´s Enagas, to proceed with the project, the executives say.

The overhang in capacity could be used by the existing offtakers or by Colbun.

The $250mn Quintero project would expand regasification capacity to 20mn m³/d and add a third 160,000m³ storage tank. The LNG terminal, completed in 2009, currently has capacity of 15mn m³/d following an initial 50pc expansion completed in early 2015.

AES Gener´s attitude toward LNG has long been seen as ambivalent. The generator was part of an original pool of prospective buyers when Quintero was first floated in the mid-2000s as a way to offset Chile´s abrupt loss of steady pipeline gas supply from Argentina. Both AES Gener and Colbun withdrew from the pool in favor of coal, which they saw as a more competitive generation fuel, and the two generators went on to build coal-fired capacity in Chile. In recent years, the two generators have routinely purchased gas on the secondary market from two of Quintero´s three existing offtakers.

Quintero´s shareholders are scheduled to take a final investment decision on the second expansion at the end of April or beginning of May, after Colbun holds a board meeting to confirm its participation. Following FID, Quintero will sign an engineering, procurement and construction contract, in anticipation of starting operations in late 2020 or early 2021.

Colbun, owned by the Matte family, will use the gas to supply its 875MW Nehuenco thermal generating complex in Quillota, in the central region of Valparaiso.

Longer term, the influential Matte clan is seen as leveraging Quintero to better position its generation assets for possible divestment.

Waiting in the wings is IC Power, which has since cemented its local financial profile, and last month secured an environmental permit for its 540MW Los Rulos combined-cycle project in Limache on the central coast near Quintero. The company could access Quintero capacity in a possible third open season down the road.

The GNL Quintero terminal is controlled by Enagas with a direct 40pc stake, on top of a 51pc stake in Terminal de Valparaiso, a joint venture with minority partner Oman Oil that owns another 40pc of the terminal. The remaining 20pc of Quintero is owned by Chile´s state-owned oil company Enap.

Enap is one of three existing offtakers at Quintero. The other two are Italian Enel and Metrogas, which is controlled by Spain´s Gas Natural Fenosa.

The Quintero terminal received a record 49 LNG cargoes in 2016. Chile has a smaller LNG terminal at Mejillones on the northern coast, in the country´s mining heartland.