Electrical Infrastructure
New T&D projects also need the support of local providers. Ingeniería IEB, a subsidiary of Ingeniería Especializada of Colombia, has entered the market through collaborations with ISA (a "natural client," in the words of Mauricio Correa, general manager of IEB). The country’s electrical infrastructure being relatively underdeveloped, one of the key challenges for the company is to find highly specialized staff: "We have a very strong engineering background in Colombia, and we feel that for the highly specialized area where we operate there is a lack of engineers in Peru," Correa says.
He added that if IEB finds the right people to achieve its goals, Peru will become the main market for the mother company: "I believe 70% of our operations will be in Peru in the medium term, because Colombia is a more mature market and there are many opportunities here. The shift towards Peru is going to be very fast." Plans are thus ambitious, considering IEB only opened up its Lima office a few months ago, but in this time the company has already secured contracts worth $1 million. Indeed, Peru is attracting service providers from across the continent. Pablo Bosch, managing director of the leading Chilean transmission infrastructure fabricator and contractor, BBosch, has identified Peru as a key market in their strategy to become "a global player," sighting the country’s massive economic growth rates and a rash of new transmission concessions as key to their decision to reenter the market.
A company that has been in Peru for longer is Dessau. Since 1998, the Canada-based company has worked on at least 10 rural electrification projects, where it continues to be active, while it is also developing transmission lines. Sergio Guzmán, vice-president of operations in Peru, emphasizes Dessau’s engineering strengths (the company employs 4,000 people worldwide) and comments on the challenges faced in Peru: "There are a number of obstacles to rural electrification. For example, a large and skilled workforce is required in order to develop these projects. The biggest problem is not technical; it is that you should source your workforce and subcontractors from the local community. In small rural communities it is unlikely that there will be sufficient, well-equipped subcontractors or enough skilled workers. A lot of local input is required, and one needs to train many people."
As the country’s electrical infrastructure increases in size and complexity, operators require increasingly sophisticated solutions in electrical management, metering, and automation. Soltec, a distributor of General Electric automation equipment, sees a bright future in this area: "In 2010 the country is spending hundreds of millions in transmission lines. After this, in the medium term, the modernization of the grid will mean new opportunities. And in the future renewable energies such as wind power will bring in changes in the way the automation of the system works," declares Patricio Bracamonte, managing director of Soltec.
With regard to Schneider Electric, its general manager, Jean Charles Vanier, describes his vision for the mid-term future: "One of the areas we want to develop is the provision of solutions for energy management, based on our metering capabilities, but also thinking of communication between meters and software for electrical management and automation within the network. We do not want to be a product provider but a turnkey solution provider with engineering capacity. There are many opportunities for growth in the power industry."
Fund-Raising
Investors willing to develop large projects will need assistance finding adequate funding. Peru’s allure for potential investors is a wealth of cash acquired from the dramatic growth in the country’s private pension funds over recent years. There is a great deal of money sitting in the banks, waiting for good opportunities to be spent.
"Every year pension funds have $1.2 billion of fresh cash, and on top of that there are redemptions, coupons, dividends.... So there is not a problem of liquidity; there is plenty of cash to invest," maintains Christian Laub, manager corporate banking at BCP, the country’s largest bank and the main provider of project funding in the power sector. Its most recent project has been the financing of Kallpa’s combined cycle, with $400 million raised through a combination of bonds, loans, and equity.
Due to the country’s financial regulations, most of the money from pension funds cannot be invested overseas, nor can it be used to directly finance many types of projects, explains Carlos A. García, managing director of Summa, an investment bank that has raised a $200 million energy fund: "There are tremendous opportunities for investment banking transactions and services in the country, but the government needs to speed up the approval of new investment vehicles that allow for the money held by the private institutional market, estimated at $40 billion, to be spent."
An investor’s paradise? Peru is a vast country, rich in resources with plenty of money to fund large projects, coupled with the support of a wide scope of service providers ready to carry the industry’s significant growth as the economy continues to develop. With these favorable conditions, it would not be hard for Peru to become a key exporter of electricity in the next decades, should the country decide to go in that direction.
— By Alfonso Tejerina (alfonso@gbreports.com), Ramona Tarta (ramona@gbreports.com), Sharon Saylor (ssaylor@gbreports.com), and Oliver Cushing (oliver@gbreports.com), Global Business Reports.
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