The deal, agreed in November 2012, highlights both Chile's attractive wind resource and what wind consultants Make Consulting call "major structural market weaknesses" that prevent a proper take-off and limit wind development to large multinationals.
Power-hungry Chile, currently with 200MW of wind online, has excellent potential wind market conditions, according to Ramon Fiestas, head of the Latin America committee at the Global Wind Energy Council.
The country is famed for sites with winds producing power equivalent to 4,000 hours at full turbine capacity a year. "For many years now, the electricity market has offered operators high electricity prices of $100-200 per megawatt hour," added Fiestas.
Long guarantees
Given those two conditions, Fiestas said wind operators did not need a feed-in tariff but instead a long-term mechanism granting renewables priority access to the grid, together with a solid structure for long-term power purchase agreements. Without that, long-term guarantees are lacking for mainstream financing, said Fiestas. For the time being then, only companies with deep pockets or special interests are taking the risk.
Talinay, on the coast of Coquimbo, is no exception. Vestas acquired the 90MW Talinay Oriente project in 2011 and originally planned to own the plant itself. However, following mounting debts and plummeting profits, the company opted in favour of ready cash from its sale.
November's deal was aided by Denmark's Export Credit Agency (EKF), which has given Enel a 12-year €110 million ($141 million) loan to help finance its estimated $165 million investment in Talinay Oriente. Similarly, a large part of Irish developer Mainstream's 400MW Chilean wind portfolio is tied up with Chinese manufacturer Goldwind, which is providing finance for its Latin American projects through investment arm, Goldwind Capital.
Like Enel - which owns Chile's main utility - other big players in the wind power industry, such as the Spanish firm Endesa, can finance on balance sheet, Fiestas said, while mining and methanol giants Barrick and Methanex have each financed and developed 66MW of online capacity, signing power purchase agreements with themselves.
Of the 4GW of new wind projects in the pipeline, the government has approved 714MW over the past 18 months.
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