Subscriber Login

Features

Chile’s Grid Segment: Investment of USD3 billion earmarked for 2019-24 [free access]

October 10, 2019

Chile is experiencing an economic recovery, mainly led by inflow of investments since 2018, which grew after four years of sustained decline. The energy sector has been a fundamental part of this recovery, with an investment of around USD3,124 million in 2018, and is becoming the third economic sector in terms of investment. The Chilean government is focusing on further expanding its power network connecting upcoming hydro and renewable energy projects. In March 2019, it conducted a roadshow to attract private investment in the power transmission segment, as a part of the country’s Plan de Expansión de la Transmisión Eléctrico Chileno or Expansion Plan of Chilean Electric Transmission. The roadshow promoted a total of 266 transmission projects worth USD3,106 million, including 63 new projects and 203 amplification projects, which will be offered to private players during 2019-24.

 

Following this, the Ministry announced three transmission tenders in April and May 2019 offering 14 new projects and 55 amplification projects, with a total referential investment amount of more than USD400 million. All these projects are part of the country’s 2017 transmission plan. For the five-year period (2020-24), tendering of another 202 projects has been envisaged, including 49 new works and 148 expansion works, for an estimated total referential investment amount of USD2,700 million.

 

Transmission bidding

The mechanism of expansion of the transmission system through regulated tenders has a long history in Chile. During 2011-16, the coordinator of the national electricity system, Coordinador Eléctrico Nacional (CEN), awarded tenders for 36 new works for its national transmission system, for a total investment volume of USD2,117 million. In 2017, the coordinator was given additional responsibility of carrying out the tendering processes for extensions and works in the zonal transmission systems. Following this, in 2018, CEN awarded 78 new works and expansion works projects, both zonal and national, for an investment amount of USD677 million. For the period 2019-24, it is anticipated to develop approximately 63 new works and 203 extension works, for an estimated total reference value of investment amounting to USD3,106 million.

 

The tenders for new works include the concession for executing and subsequently earning revenue from the transmission projects, with annual income corresponding to the value awarded in the bid, for a period of 20 years. After this period, the facilities and their value will be reviewed and updated by CNE in the Existing Facility Valuation Study, which is performed every four years. The awarded bidder’s compensation consists of the valor anual de la transmisión por tramo (VATT) or the annual value of transmission per section (AVTS), based on its financial bid and indexation formula, which will be applied during a 20-year period starting with the commercial operation date. The AVTS includes the capital investment recovery in addition to the costs of administration, operation and maintenance. The end-consumers pay the AVTS to their respective suppliers through a base rate charge previously defined by the regulator. The power suppliers will collect the base rate charge and will make the payment to the transmission facility owners on a monthly basis. National and foreign transmission companies, that operate existing transmission facilities in Chile or other countries, may submit tender proposals for new works. Bidding companies can submit their tenders individually or as a consortium.

 

Tenders for expansion works are awarded as engineering, procurement, and construction (EPC) contracts. The payment of these contracts corresponds to the value awarded in the bid. The successful bidder receives the investment value (IV) based on its financial bid for executing the works. The payments are made during the execution of the works, according to the schedules defined in the bid, which consider five to seven milestones depending on the magnitude and term of execution of the project. The owner of the facilities to be expanded pays the awarded bidder. National or foreign construction companies with experience executing power transmission works in Chile or other countries may submit tender proposals for expansion works. Bidding companies can submit their tenders individually or as a consortium.

 

Figure 1: Transmission project tender procedure


https://www.globaltransmission.info/images/Figure1-GMT2019.jpg

Note: MINENERGIA: Ministry of Energy, Chile

Source: Global Transmission Research

 

Transmission Tenders 2019

During March-May 2019, a total of three tenders were announced by CEN for the expansion of national and zonal grid network. Under these, 14 new projects worth referential investment of USD289 million and 42 amplification projects worth referential investment of USD119 million were offered.

 

The first tender was announced in March 2019, to offer 15 amplification national and zonal projects with a total referential investment amount of USD87.7 million. For these projects, the bid submission period was during September 23-27, 2019, with an award date scheduled on December 18, 2019.

 

In April 2019, CEN offered eight new projects, and after consulting with the players, published its bid terms in September 2019. These projects are part of Chile’s 2017 transmission plan, and are also included in the Decree No. 4/2019, published on January 9, 2019. Of these projects, four are national projects and the remaining are zonal projects. The key project offered under this is the 500 kV Parinas–Likanantai Transmission Line project, which includes construction of a 500 kV double-circuit line to be initially energised at the 220 kV level and construction of the Likanantai substation with a capacity of about 1,000 MVA.

 

The proposals for these projects will be received by CEN during November 12 till November 20, 2019. Administrative and technical offers will be opened on November 21, 2019, and economic bids on February 6, 2020, with a scheduled award date of February 14, 2020.

 

Table 1: New projects offered by CEN in April 2019 (under bidding)

Segment

Projects

Months

VI Reference

value (USD million)

COMA

Reference value (USD million)

National

500/220 kV Parinas sectioning substation

36

54.31

868.98

National

220 kV JMA  sectioning substation

36

19.11

305.77

National

4x220 kV line from Nueva Los Pelambres substation to sectioning of the segment of the 2x220 kV Los Piuquenes–Tap Mauro line

36

14.98

239.38

Zonal

Bypass construction for 1x220 kV Atacama–Esmeralda line, 1x110 kV line Esmeralda–La Portada line, and 1x110 kV Mejillones– Antofagasta line.

48

13.36

213.71

Zonal

220/110 kV Nueva La Negra sectioning substation

48

14.69

235.11

Zonal

110 kV La Ruca sectioning substation

24

6.49

103.91

Zonal

44 kV Chagres sectioning substation

36

4.09

65.36

National

2x500 kV Parinas–Likanantai line (initially energised at 220 kV)

48

105.62

1,689.99

Note: COMA–Operation, maintenance and administration costs; VI–Investment value

Source: CEN

 

The third bid was offered in May 2019, consisting of six new projects and 12 amplification projects with total referential investment of more than USD88 million. The modified bidding terms were published in September 2019. These projects correspond to the expansion plan of 2017. Under this, CEN has offered six groups of conditional works (grouping of new and expansion works) containing 18 projects, and six separate groups for 12 expansion projects. A bidder is required to submit proposals for both new and expansion projects, in case of bidding for conditional works. As per the conditions established in Decrees 4/2019 and 293/2018, the works mentioned in a particular group are required to be allocated together only. In case of conditional groups, if it is not possible to award the new work, the extension works will not be awarded, and the entire group will be declared void. However, if the corresponding expansion works are being allotted in expansion groups, then only new works will be awarded under conditional groups.

 

Notwithstanding the above, it is possible that the new work will be awarded to different proponents, such as the expansion works. For instance, in the case of Group 7, the extension works may be awarded even if the new work of Group 1 is not awarded. In this case, only new projects of Group 1 will be offered under conditional groups.

 

The proposals for these projects will be received by CEN during November 26 to December 2, 2019. Administrative and technical offers will be opened on December 4, 2019, and economic bids on February 24, 2020, with a scheduled award date of February 28, 2020.

 

Table 2: Conditional and expansion groups offered by CEN in May 2019 (under bidding)

Group 

Type 

Name of work 

 Deadlines for  entry into operation [months] 

VI reference

value (USD '000) 

Conditional works

G1

New Work

New 2x220 kV Lagunas–New Pozo Almonte line, (laying of first circuit)

48

19,173

Expansion

Expansion Lagunas substation

24

2,443

G2

New Work

New 2x110 kV line from Caldera substation to 1x110 kV Cardones–Punta Padrones line

48

2,511

Expansion

Expansion of Caldera substation

24

2,577

G3

New Work

1x110 kV Cerrillos–Atacama Kozán line

48

2,205

Expansion

Expansion of Cerrillos substation

24

3,387

Expansion

Expansion of Atacama Kozán substation

24

965

G4

New Work

2x220 kV Candelaria–Nueva Tuniche and Nueva Tuniche 220 kV substation

48

19,573

Expansion

Expansion of Candelaria substation

24

1,797

Expansion

Expansion of 2x220 kV Punta de Cortés–Tuniche line

36

6,722

Expansion

New transformer at Punta de Cortés substation

36

8,057

Expansion

Expansion of Punta de Cortés substation for line interconnection with 2x220 kV Punta de Cortés–Tuniche line

36

1,970

G5

New Work

1x66 kV La Esperanza–El Manzano line

36

3,868

Expansion

Expansion of El Manzano substation

24

1,920

Expansion

Expansion of La Esperanza substation

24

786

G6

New Work

La Señoraza 220/66 kV substation

36

8,706

Expansion

Expansion of Laja substation

24

580

Expansion

Expansion of Celulosa Laja substation

24

775

Expansion works

G7

Expansion

Expansion of Lagunas substation

24

2,443

G8

Expansion

Expansion of Caldera substation

24

2,577

G9

Expansion

Expansion of Cerrillos substation

24

3,387

Expansion

Expansion of Atacama Kozán substation

24

965

G10

Expansion

Expansion of Candelaria substation

24

1,797

Expansion

Expansion of 2x220 kV Punta de Cortés–Tuniche line

36

6,722

Expansion

New transformer at Punta de Cortés substation

36

8,057

Expansion

Amplification of Punta de Cortés substation for line interconnection with 2x220 kV Punta de Cortés–Tuniche line

36

1,970

Expansion

Expansion of El Manzano substation

24

1,920

G11

Expansion

Expansion of La Esperanza substation

24

786

  

G12 

Expansion

Expansion of Laja substation

24

580

Expansion

Expansion of Celulosa Laja substation

24

775

Note: The Expansion Works of Group 1 are related to those of Group 7; of Group 2 to Group 8; of Group 3 to Group 9; of Group 4 to Group 10; of Group 5 to Group 11; and of Group 6 to Group 12.

Source: CEN

 

Upcoming bids 

Under its current plan, the Ministry has planned to offer 202 transmission projects with a total referential investment amount of USD2.7 billion during 2020-24. The summary table with the estimated works that will be proposed by CEN for future expansion plans for the five-year period 2020-24, to be mandated by the Ministry of Energy is as follows:

 

Table 3: Numbers and value of projects planned to be offered during 2020-24 

Year 

 

New 

Amplification 

Total 

2020

Number of projects

10

21

31

VI reference value (USD million)

140

107

247

2021

Number of projects

10

34

44

VI reference value (USD million)

115

120

235

2022

Number of projects

12

33

45

VI reference value (USD million)

531

102

633

2023

Number of projects

10

33

43

VI reference value (USD million)

1,292

107

1,398

2024

Number of projects

7

40

47

VI reference value (USD million)

78

107

185

Total

Number of projects

49

161

210

VI reference value (USD million)

2,156

542

2,698

Note: VI–Investment value

Source: CEN

 

Some of the key projects expected to be offered include the ±600 kV Kimal–Lo Aguirre transmission line project, which entails the construction of a new two-pole, high voltage direct current (HVDC) transmission line with a metallic return of at least ±600 kV between the Kimal converter substation and the converter station in Lo Aguirre. The approximate length of the line is 1,500 km, with a transmission capacity for each pole of at least 2,000 MW. In September 2019, CNE initiated the route study of the project. The project is scheduled to be offered in 2023.

 

Two other 500 kV transmission line projects – Entre Ríos–Ciruelos (which will be energised at 220 kV initially) and Ciruelos–Pichirropulli (which will be energised at 220 kV initially), will be offered in 2022, as per the Ministry’s plan.

 

Table 4: Key transmission projects to be auctioned by CEN 

Project

Voltage (kV)

Line length (km)

Substation
capacity (MVA)

 VI reference
value (USD million)

Scheduled
completion

Entre Ríos–Ciruelos transmission line

500 (initially it would be energised at 220 kV)

NA

Not applicable

 359

2028

Ciruelos–Pichirropulli transmission line

500 (initially it would be energised at 220 kV)

NA

Not applicable

 85

2028

Kimal–Lo Aguirre HVDC line

±600

1,500

Construction of four converter stations

 1,176

NA

Alto Melipilla–Bajo Melipilla line

110

NA

NA

 3

NA

Sectioning of Loica substation and 2x220 kV Loica–Portezuelo line

220

37

NA

 38

NA

Sectioning of 2x220 kV New Maitencillo-Punta Colorada line with Don Hector substation

220

NA

NA

 9

2023

Sectioning of 220 kV Los Peumos–Duqueco line with Mulchén substation

220

68

530

 17

2024

Roncacho sectioning substation

220

Not applicable

NA

 4.93

NA

Agua Amarga sectioning substation

220

Not applicable

NA

6.76

NA

Damascal sectioning substation

110

Not applicable

NA

5.69

NA

Loncura sectioning substation

110

Not applicable

NA

5.7

NA

Codegua sectioning substation

110

Not applicable

NA

11.63

NA

Litueche sectioning substation

110

Not applicable

NA

4.45

NA

Amplification of Tineo substation

110

Not applicable

NA

0.7

2025

Increase the capacity of 66 kV Choapa–Illapel line to 110 kV

110

51

Not applicable

5.7

2025

New transformer at Monte Patria substation

66/23

Not applicable

10

1.5

2025

New transformer at Quínquimo substation

110/23

Not applicable

20

2.1

2025

Augmentation of capacity of Batuco substation

110/23

Not applicable

50

3.2

2025

Augmentation of capacity of Lo Boza substation

110/12

Not applicable

50

2.8

2025

Mapocho substation

110

Not applicable

150

50

2025

Augmentation of the capacity of Los Almendros substation

220/110

Not applicable

400

15.8

2025

Note: NA-Not available

Source: CEN

 

Outlook

The outlook for the country looks positive. The enthusiasum in the Ministry to promote investment in power transmission projects, preserves the confidence of private players in the transmission segment of the country. Being one of the stable countries among the Latin American region, Chile is likely to maintain a stable economic outlook owing to the country’s sound economic policy and institutional framework.