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Company Visit

Visit to Gener's coal-fired Angamos plant

U.R.

AES Gener

29 August 2011 Tomas Gonzalez [email protected] +562 490 5034

Utilities | Chile

518MW, with battery storage to provide 20MW

Last Thursday (August 25) we visited the Angamos facility, the first coal-burning power plant AES Gener has built in 10 years, in the SING grid. The project is in Region II (Antofagasta) 1,415km from Santiago, in the industrial sector of Mejillones, on the northern side of the current Mejillones port complex. It comprises two steam turbine units with total gross capacity of 518MW (470MW net), with expected average generation of 3,500GWh/year, burning bituminous and subbituminous coal (specific consumption 9,939.84 BTU/KWh based on coal of 6,000Kcal/Kg). The first unit is operating and the second is expected to be operating at its full capacity by the end of September this year.

Battery system

Overview

Share price (ChP) Target price (ChP) Return (%) Rating Shares (mn) Market Cap (US$mn) Ticker (BB) Forecast (US$mn) Revenue Ebitda Net profit PE (x) EV/Ebitda (x) Source: Celfin Capital. 2011E 1,518.4 490.8 219.1 19.3 16.2 268 U.R. N/A U.R. 8,070 4,621 GENER CI 2012E 1,730.1 534.8 252.2 16.8 14.7

Located close to Angamos is its innovative Battery Energy Storage System (BESS), which consists of a bank of high-efficiency, industrial-scale rechargeable lithium batteries capable of providing 20MW. This effectively increases the plant's total working capacity; and provides a reserve capacity able to play an essential role in any contingencies affecting stability of supply.

Financing

The total investment associated with Angamos has been ~US$1,300mn. This includes a 140km transmission line for connection to the SIC grid at the Laberinto node. The facility also includes all the investment required to comply with the new emissions regulation. The Environmental Impact Study was approved in September 2007. Much of the finance for the project came from a project finance deal made in October 2008, for up to US$988mn for construction of the plant. Of this, (i) US$675mn is guaranteed by Korea Export Insurance Corporation (KEIC), (ii) US$233.5mn comes from a traditional syndicated loan, and (iii) US$80mn comes from other sources with guarantees. The seven-bank syndicated loan, led by BNP Paribas and ABN Amro, is for 17 years, including a construction period of 3 years, and is secured on the project's assets, inventories and flows. Backing this financing are two long-term contracts with mining companies operating in the area of the SING grid. One is with Minera Escondida, for 340MW for 18 years, the other with Minera Spence, for 90MW for 15 years.

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AES Gener | Company Visit

29 Au gust 2011

Global location

View of Mejillones Bay

Angamos

Source: Celfin Capital.

Source: Celfin Capital.

Project master plan

Coal storage Substation

Steam turbine / Boiler Unit 1 Unit 2 Chimney stack

Cooling system FGD

Sources: Celfin Capital.

The coal is transported from the pier at the port of Mejillones, where it is discharged into a storage yard by conveyor belt, and from there transported via another conveyor belt to the boiler for combustion.

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AES Gener | Company Visit

29 August 2011

From port to storage yard

Coal transport system

Coal transport system

Sources: Celfin Capital.

Sources: Celfin Capital.

Sources: Celfin Capital.

Storage yard

Coal transport system

From storage yard to boiler

Sources: Celfin Capital.

Sources: Celfin Capital.

Sources: Celfin Capital.

Entrance to the boiler

Entrance to the boiler

Source: Celfin Capital.

Source: Celfin Capital.

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AES Gener | Company Visit

29 August 2011

Fuel oil pipelines and storage

Fuel oil pipelines and storage

Fuel oil pipelines

Sources: Celfin Capital.

Sources: Celfin Capital.

Sources: Celfin Capital.

Turbine / Generator house

Turbine / Generator house

Source: Celfin Capital.

Source: Celfin Capital.

Main plant components: 2 steam turbines · 2 generation units · 2 transformer units ·

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AES Gener | Company Visit

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Cooling water system

Cooling water system

Source: Celfin Capital.

Source: Celfin Capital.

After its energy has been used in the turbine, the steam is liquefied in the condenser at ambient temperature. The required cooling water is extracted from the sea. Cooling towers help to decrease the use of seawater by 90%. Transformers Angamos substation

Source: Celfin Capital.

Source: Celfin Capital.

As well as CO2, combustion of coal produces SO2, NOx, ash, slag, and gypsum. The ash in the gaseous effluent that would otherwise accumulate in the hoppers is separated from the gases by an electrostatic precipitator and pumped to a silo where it is stored. It is then removed by truck to a specialized landfill application, or to be used in the construction industry as raw material for cement.

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AES Gener | Company Visit

29 August 2011

Electrostatic precipitator

Chimney stack

FGD ­ Flue gas desulfurization

Sources: Celfin Capital.

Sources: Celfin Capital.

Sources: Celfin Capital.

Flue gas desulfurization (FGD) is a technology used to remove sulfur dioxide (SO2) from the exhaust flue gases of power plants burning fossil fuel. Chile has enacted stringent environmental regulations on SO2 emissions. For a typical coal-fired power station, FGD will remove 95 percent or more of the SO2 in the flue gases.

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Research Team & Disclaimer

Celfin Capital Equity Research

Chile Cesar Perez-Novoa Managing Director: Strategy & Economics +562 490 5012 [email protected] Tomas Gonzalez Senior Analyst: Electric & Water Utilities, TMT +562 490 5034 [email protected] Gustavo Fingeret Senior Analyst: Beverages, Banks & Retail +562 490 5029 [email protected] Alex Sadzawka Small Caps Analyst: Industrials +562 490 5448 [email protected] Jeanne Marie Benoit Small Caps Analyst: Consumer +562 490 5304 [email protected] Peru Isabel Darrigrandi Senior Analyst: Metals & Mining +562 490 5093 [email protected] Hedmond Rios Economist +562 713 4807 [email protected] Mario Arend Chief Economist +562 713 4903 [email protected] Colombia Natalia Agudelo Senior Analyst: Energy & Utilities +574 326 1376 [email protected] Jairo Agudelo Senior Analyst: Industrials, Consumer & Mining +574 326 1376 [email protected] Ruben Arismendy Analyst: Metals and Mining Exploration +574 326 1376 [email protected] Juan Camilo Dauder Economist / Senior Banks Analyst +574 326 1376 [email protected] Andres Cardona Analyst: Industrials +574 326 1376 [email protected]

Disclaimer

This document and its contents do not constitute an offer, invitation or solicitation to purchase or subscribe to any securities or other instruments, or to undertake or divest investments. Neither shall this document or its contents form the basis of any contract, commitment or decision of any kind. This material has no regard to the specific investment objectives, financial situation or particular needs of any recipient. It is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Before undertaking any transaction with these instruments, investors should be aware of their operation, as well as the rights, liabilities and risks implied by the same and the underlying stocks. Investors should note that income from such securities or other investments, if any, may fluctuate and that price or value of such securities and investments may rise or fall. Any information relating to the tax status of financial instruments discussed herein is not intended to provide tax advice or to be used by anyone to provide tax advice. Foreign currency rates of exchange may adversely affect the value, price or income of any security or related investment mentioned in this report, thus investors effectively assume currency risk. References to third parties are based on information obtained from sources believed to be reliable but are not guaranteed as being accurate. Celfin Capital has not independently verified such information and therefore no warranty, either express or implicit, is given regarding its accuracy, integrity or correctness. Recipients should not regard it as a substitute for the exercise of their own judgment. Any opinions expressed in this material are subject to change without notice and Celfin Capital is not under any obligation to update or keep current the information contained herein. Celfin Capital may make purchases and/or sales as principal or agent of this security or provide corporate finance or other services to the issuer. However, Celfin Capital does not trade for its own account. Celfin Capital or any of its salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to its clients that reflect opinions that are contrary to the opinions expressed herein. Furthermore, Celfin Capital or any of its affiliates' investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. Celfin Capital accepts no liability of any type for any direct or indirect losses arising from the use of this document or its contents. All information is correct at the time of publication; additional information may be made available upon request. Rating System: Ratings refer to a period of 12 months. Our ratings are classified in three categories: Buy = an absolute return of at least 15%; Hold = an absolute return between 15% and 5%; Sell = a return of 5% or lower in relation to its absolute valuation. Under exceptional circumstances and for specific reasons, we may use UR ­ Rating under review.

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