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Lighting the way ahead

  Mile Cacic
  Mile Cacic
CEO Luz del Sur

Since initiating its reform programme at the beginning of the 1990s, Peru has established itself as an emerging country with impressive, and sustained, economic growth. In recent years annual GDP growth has been a steady 7%, demonstrating the great potential of Peru as a commercially viable trade partner, a position strengthened by the signing of a free trade agreement with the US, which will add further dynamism to the country’s economy.

For the energy industry, it has been necessary to expand in harmony with the rhythm of the country’s economic growth so as not to stem its flow. In the last 13 years, over $6 billion has been invested in the sector, primarily to increase production capacity in hydroelectrical and thermal plants, to upgrade old fossil fuel plants to enable them to use natural gas and to increase electrical coverage in the country from 45% to 76%.

Mile Cacic (INTERVIEW), CEO of electricity distributor Luz del Sur, which serves the southern and eastern zones of Lima, says, “Our shareholders, PSEG and Sempra, have found investing in Peru a very satisfactory experience, and they believe that this country represents an excellent business opportunity for foreign investors interested in installing new generation plants.”

Demand in Peru is growing at an average 10% annually and for supply to keep pace it will be necessary to install at least 500MW per year. Installed capacity is now 5800MW, of which over 600MW is supplied by obsolete thermal plants in need of modernisation. The need to satisfy growing demand and the upgrading of these plants represent significant opportunities for investors who have not yet been able to break into the strongly-consolidated sector.

The energy sector is also highly important in Peru’s inflow of investment, and in the hands of private companies it is poised to glean the necessary investment to increase energy capacity and thereby meet the burgeoning demand.

Peru has vast reserves of natural gas, and the gas pipeline has the capacity to deliver large sums to the coast, facilitating the installation of modern generation plants that run on a clean and efficient fuel source. Gas supplier Camisea Consortium is leading the march to expand Peru’s petrochemical industry and provide the country with a competitive resource, with a view to regional exports.

“Camisea gas is very important as it has added a source of energy for electricity generation that was not there four years ago,” continues Mr Cacic. “The potential for increasing the power supply in Peru is now much greater because of gas.”

The energy industry in Peru has advanced significantly over the past 13 years since reforms began, but it still has a long way to go to attract new competitors into generation with gas fired plants, which would balance the current heavy reliance on hydroelectrical potential. Peru’s geographical location, natural resource base and rapidly growing economy present an attractive prospect for investors. Luz del Sur, now serving more than 3.5 million people, is committed to the improvement and expansion of its energy sector.