SANTIAGO Dec 7 Mining companies in Chile, by
far the world's largest copper producer, are examining their
energy contracts to see if they can renegotiate terms to
incorporate now-cheaper renewable power, company sources say.
The mines, long reliant on coal and gas to power everything
from milling to drilling, are also inviting a broad range of
wind and solar producers to major energy tenders for the first
The shift away from dirty energy in some ways reflects the
unique situation of Chile, which has virtually no local gas or
coal reserves, but a long, arid coastline amenable to wind and
But it is also a response to technology-driven declines in
worldwide renewables prices, which at times are allowing clean
energy generators to undercut fossil fuel providers even in
countries like Chile with no significant subsidies.
Companies like Spain's Acciona Energia and
Ireland's Mainstream are set to benefit from the change. The
moves could also imply major cost savings for Chile's copper
industry, which spends around 20 percent of overhead on energy,
according to Chile's mining industry body.
Traditional power companies, however, such as Colbun
, AES Corp's Latin American arm AES Gener
, and Engie Energia Chile risk losing out, and
are diversifying into renewables to remain competitive.
Up until 2014, nearly all of the nation's public and private
energy contracts went to gas, diesel, hydroelectric, and coal
Wind and solar firms slowly began submitting competitive
bids for power contracts. By August of this year they scooped up
around half of tendered energy in a massive, 12.3 terawatt
government auction to supply Chile's public grid from the 2020s.
The renewables firms undercut bids by traditional producers
by more than 70 percent in some cases in that auction, catching
the attention of Chile's mining companies - which consume about
a third of the country's energy, but only get 8 percent from
wind and solar.
"Industrial customers are reviewing their contracts, they
are anticipating tenders, they are trying to seize the moment
and take advantage of this buyer's market," said Juan Francisco
MacKenna, one of Chile's leading energy project and regulation
Some mines are paying well over $100 per megawatt-hour on
their most expensive contracts, while wind producers have
offered 24-hour power for prices as low as $38 on Chile's public
State-owned copper giant Codelco, hit by
slumping copper prices, is re-examining terms with energy
providers as part of a wider contract review, Alvaro Aliaga,
vice president of its northern division, told Reuters last
Others, including Antofagasta, are also looking to
revise their energy contracts, some of which expire as late as
the 2030s, said four sources familiar with the energy
contracting strategy of Chile's largest mining companies.
Antofagasta declined to comment, but a document released by
the company on Monday noted that low prices at the public power
auction implied energy cost savings.
Some contracts are more flexible than others, the four
sources said, but the goal would be to make pre-expiration
changes to cheaper renewables or pressure traditional suppliers
to lower their prices.
The mining companies would likely take advantage of
scheduled re-negotiation periods where they exist, they said.
Still, some energy negotiation professionals said
arbitration procedures were a possibility for particularly rigid
and long-term agreements.
Upcoming energy auctions for new supply contracts,
meanwhile, are expected to feature many more renewables players
than in the past.
For instance, the Collahuasi copper mine, a joint venture of
Anglo American and Glencore, recently launched
a tender for a 1.2 terawatt energy auction.
Among those invited to bid, according to company and legal
sources, are Spain's SolarPack, Mainstream, and other foreign
renewable providers, as well as traditional incumbents. The
auction offers a novel solar-friendly daytime bloc, in which
companies bid to provide energy only during daylight hours, one
source with knowledge of the auction said.
Antofagasta will likely launch an energy supply tender for a
planned expansion of its Centinela mine next year, while Codelco
will run one for a possible expansion at its Radomiro Tomic
mine, two of the sources familiar with the energy contracting
strategy of the companies said.
Traditional energy companies, in response, are moving toward
renewables in an attempt to maintain their market share.
Engie Chile, majority owned by French natural gas and
electricity supplier Engie, said in August it would
build 400 megawatts of solar capacity in Chile, and AES Gener
CEO Javier Giorgio told Reuters the company was looking at
incorporating renewables into coming mining bids.
"The company is going to pass from being strong in
conventional energy to one that has a much more balanced mix
between conventional and renewable energies," Giorgio said.
"From our point of view, we're not willing to limit
(Reporting by Gram Slattery, additional reporting by Anthony
Esposito, Fabian Cambero, and Felipe Iturrieta; Editing by
Rosalba O'Brien, Christian Plumb and Andrew Hay)