Fast Market Research recommends "Argentina Power Report Q4 2013" from Business Monitor International, now available
Boston, MA -- (SBWIRE) -- 09/25/2013 -- BMI View: Despite claims to the contrary - CAMMESA has publicly affirmed that it has energy provision under control - there are many reasons to believe that Argentina is on the brink of an energy crisis. From anecdotal tales of outages to indicators of the unfriendly business environment - such as government requirements for a percentage of materials and/or services to be sourced nationally or the fact that only one firm (the utility, IMPSA) submitted a bid for the fourth phase of the Arauco I wind farm - there are widespread signs that Argentina is struggling to attract foreign investment in its energy sector. While the authorities have grand plans to boost the percentage of electricity generated by nuclear sources, without a radical change in the operating environment, we do not think that these goals are realistic. As such, we think that uncertainty will prevail in Argentina's electricity market in the short term.
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Argentina's power generation increased by an estimated 4.2% during 2012, underpinned by an estimated 4.0% rise in consumption, but we do not forecast that growth will continue at this rate. We expect that generation will fall by 0.61% in 2013, with a similar fall in consumption, as several factors (including rising inflation and the government's interventionist stance) make mean that Argentina's business environment is unattractive to potential investors.
In terms of generation, thermal-based sources, primarily natural gas, remain the cornerstones of the electricity mix. Roughly 65% of electricity is currently generated from oil-, gas- or coal-fired power plants, with hydropower providing the next largest contribution, of 28%. Going forward, we expect this trend to continue, despite the government's efforts to diversify the electricity mix away from unreliable hydropower and costly thermal imports; we do not share the government's forecast that electricity generated from nuclear sources of power will account for 18% of total generation in the medium term.
Key developments for Argentina's power sector this quarter include:
- A consortium led by Argentina's Electroingenieria and China's Gezhouba won a contract for the construction of the Jorge Cepermic and Nestor Kirchner hydroelectric power plants. The China Development Bank is funding 85% of the project.
- While Argentina's government continues to voice its support for nuclear power - with Atucha II subject to test runs in mid-2013 and set to begin full operations by October 2013 - a question mark hangs over the government's ability to fund its ambitious nuclear programme, not least given its nationalist stance on tenders (reports state that the government is calling for 60% of parts to be sourced domestically).
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