On Monday, September 1, 2008, the lights in Caracas and eight surrounding states in Venezuela went out.
An 800,000-volt transmission line failed, and five gigawatts of power were eliminated from the powergrid. A press report said that Zulia, the Venezuelan state a the heart of the oil industry, was "the state most affected by the blackout."
Now, the national power company, Corpoelec says it will spend $13 billion in power investments for thermo and hydro plants. More than 30 new projects are expected to be funded.
Transmission and distribution networks will account for roughly half the number of new projects. But there are some rumors of diversification in the OPEC member's power generation. In fact, Menpet, Venezuela's energy and oil ministry, has installed 779 solar panel systems and is planning a solar panel factory.
And last year, Chavez said he would use oil money to build an offshore wind farm on the Caribbean coast.
Turns out, Venezuela is not alone when it comes to renewable energy investments...
Unlike Venezuela, who is an energy exporter, Chile imports two-thirds of the fuel it consumes: oil, natural gas, coal. It is almost wholly dependent on its neighbors for energy supplies. Argentina supplies all of the country's natural gas imports and even some oil imports (with Brazil, Angola and Nigeria rounding out its oil suppliers). Coal imports come mostly from Australia, Indonesia and Colombia.
In fact, asside from a couple of coal mines and small oil operations, Chile's domestic energy production is centered on hydroelectric plants.
But this winter has been the third-driest in 50 years, and persistent problems with Argentine natural gas supplies have led to sever power shortages. Prices have gone up 527% in the last year, and now, it's crunch time...
Growth estimates in Chile have been parred back from 4.5-5.5% to 4-5% for 2008.
This growth is mainly fueled by industrial and mining sectors, and profits for both are heavily yoked to energy costs.
Part of the solution is building more capacity... More hydroelectric plants, for example - GDF Suez (GSZ:Paris) is building at least six new hydro plants in southern Chile - but also wind farms.
GDF Suez has also been contracted to build two wind farms, but it's not the only company in on the action.
Canada-based Methanex (MEOH:Nasdaq) announces plans to develop a wind farm in the Magallanes region in southern Chile in order to boost power production at its methanol plants hit by Argentina's natural gas supply cuts.
Australia's Pacific Hydro is working with BHP Billiton (BHP:NYSE) to build wind farms in northern Chile, and has already built a wind farm in Brazil. BHP wants to use wind energy to power some of its mining operations.
A British energy company, Seawind International, plans on investing $175 million in Chilean wind farms, and will also expand operations into Peru, Argentina, Brazil, and Ecuador.
This follows the ongoing pattern of Western European companies coming to Latin America to reap the benefits of booming economies. It's working with banks and financial institutions; it's working with oil and gas companies (except where nationalization is the modus operandi); it's working with beverage companies, telecommunications, and mining companies.
To be blunt, this is the first wave of renewable energy investments in Latin America. I think it'll catch on quickly, but investment tides can change quickly in this over-anxious market scenario. Investors should look to established companies - most likely in Europe - for solid opportunities in the renewable energy sector.
I'm paying particularly close attention to several spin-off companies that have hit the market running. In one case, the parent company floated shares of its renewable energy business and that spin off instantly became one of the top ten companies by market cap in its country.
I'll be naming this company in tomorrow's Taipan Trader alert. You can find out more from the website.
