Origin Energy Limited (Origin) today announced the acquisition of a 51 per cent interest in one of Chile's leading hydroelectric development companies, Energía Austral, from Xstrata Copper.
Energía Austral is currently assessing the feasibility of developing a hydroelectric project of approximately 1,000 MW in the Aysén Region of southern Chile. Once completed, it will comprise up to three hydroelectric plants and a transmission system connecting the project to the nation's Central Interconnected Grid (SIC).
Origin will take the lead role in developing Energia Austral's hydroelectric project with Xstrata Copper retaining a 49 per cent stake in the company.
Under the terms of the agreement, during the next three years Origin will progressively invest project development costs of US$75 million for the completion of a detailed project feasibility study, and, if the project is deemed feasible, an additional US$75 million towards a final investment decision. Xstrata Copper will be entitled to additional payments when the project is operational and only if certain revenue threshold targets are met.
Origin Managing Director, Mr Grant King said, "Energía Austral's project is situated in an area of reliable rainfall and stable water flows making it ideal for hydroelectric generation, and, in coming years, stands to play an important role in providing the nation with an efficient, flexible and reliable supply of electricity from a renewable resource.
"Origin's investment in Energía Austral is consistent with the company's pursuit of a portfolio of renewable energy opportunities in markets with attractive growth options. It also complements Origin's existing footprint in Chile through its 40 per cent interest in the nation's leading geothermal exploration company, Energía Andina," Mr King said.
Through its majority shareholding in Contact Energy, which operates 750 MW of hydroelectric assets in New Zealand, Origin has the ability to leverage considerable experience in the operation of large hydroelectric projects. The company also plans to leverage its existing hydro expertise in its investment in Energía Austral and the Purari Hydro Project in Papua New Guinea, which is currently undergoing feasibility studies.
Xstrata Copper Chief Executive Officer, Mr Charlie Sartain, said "We are delighted to secure Australia's leading integrated energy company as a partner in Energía Austral. Origin has recognised energy development expertise and a strong sustainability track record.
"I am confident that given Origin's expertise, Energía Austral's project will be successfully taken to the next stage of development to provide a stable, long-term source of energy for Chile," Mr Sartain said.
Energía Austral Managing Director, Mr Alberto Quinones, said, "Origin's investment in Energía Austral, which follows its extensive assessment of the technical, environmental and social aspects of the project, represents a significant milestone in the development of this exciting project."
Energía Austral is midway through a full feasibility study of the project with a final investment decision currently anticipated in 2015/2016.
Energía Austral has the potential to deliver a range of benefits to the Aysen Region. During construction, the project is expected to require a workforce of approximately 4,000 people with a significant number drawn from the local region.
In the development of its project, Energía Austral will be guided by international environmental and social standards, including those endorsed by the Australian and Chilean governments, the International Finance Corporation, the World Commission on Dams and the International Hydropower Association.
According to Chile's National Energy Strategy 2012-2030, between now and 2020, growth rates of around 6 per cent to 7 per cent are projected for electricity consumption in Chile, which means almost 100,000 GWh of total electricity demand by that year. The Strategy denotes that this equates to an increase in supply of some 8,000 MW of new generation projects would be needed to satisfy the demand.
Source: Origin Energy