Teyma offers Uruguay’s UTE a record low price for wind power

Uruguay’s state-owned power company, UTE, received a bid for a wind farm operation lease that promises a record low rate for wind power. The Spanish company Teyma, which will also construct the 70 megawatt wind farm in Salto, offered a price of $61 USD per MWh. That price is the lowest UTE has ever received from a private company for wind generated power. Previously the lowest was $65 USD per MWh which UTE received in a tender last year.

The leasing contract lasts 20 years and UTE retains an option to buy the wind farm when the contract expires. In UTE’s lease agreements, UTE assumes the risk that power won’t be generated or used. UTE is obligated to pay the operator $61 USD per MWh independent of whether or not the farm sends power to UTE’s grid. UTE sets minimum maintenance standards for the operator to ensure the wind turbines are kept functional.

This lease agreement represents Teyma’s third wind farm in Uruguay. Currently, Teyma is building a 50 MW farm near Peralta (Tacuarembó). That farm is expected to begin contributing power to UTE’s grid near the end of 2013 or the start of 2014. The company is awaiting approval for Uruguay’s environmental regulator to begin construction on a 50 MW farm in Flores.

UTE is expected to award construction contracts for three new wind farms before the end of 2013. One farm will also be set up as a lease and generate 140 MW. The other two will both generate 70 MW each and will be structured as joint ventures. The private companies constructing and operating these two farms will provide 70% of the financing, UTE will provide 20% and 10% of the financing is expected to come from Uruguay’s private pension funds (AFAPs).

This Uruguayan Business Reports news article is a translation of a news article that appeared in the Uruguayan newspaper El Observador. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.

India’s Suzlon puts down deposit to guarantee construction of joint UTE Eletrobras wind farm in Uruguay

The Indian wind turbine supplier Suzlon presented a bank guarantee of $5 million USD to Uruguay’s state energy company UTE as insurance that Suzlom will complete construction of a 65 megawatt (MW) wind farm in the Uruguayan department of Colonia. Suzlon survived a near bankruptcy last year.

Now UTE will begin to negotiate with Uruguay’s National Environmental Agency (Dinama) for authorization to assembly the wind farm in the community of Rosendo Mendoza, Colonia. After UTE obtains authorization from Dinama, UTE will form a joint venture with the Brazilian state utility Eletrobras to manage the wind farm. The project will cost $105 million USD.

UTE and Eletrobras chose Sulzon to build the wind turbines for their first jointly owned wind farm in the middle of 2012 after extending an international tender.

In October of 2012 the Indian firm nearly went bankrupt which raised doubts at UTE over whether Sulzon was sufficiently solvent to handle the project. UTE then demanded Sulzon put down a $5 million USD advanced guarantee that they would complete the project.

Provided there are no setbacks, the Colonia wind farm is expected to start providing power to UTE’s grid by the start of 2015.

This Uruguayan Business Reports news article is a translation of a news article that appeared in the Uruguayan newspaper El Observador. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.

Techint wants an extra $30 million USD from UTE for project to connect Uruguay to Brazil’s power grid

Techint, an Argentinean firm in charge of building a new connection between Uruguay’s and Brazil’s power grids, presented a written request to UTE, Uruguay’s state-run electricity provider, for an additional $30 million to cover costs stemming from technical errors by UTE which raised the project’s estimated cost. UTE originally budgeted the connection at $130 million USD.

During the negotiations between UTE and Techint over the additional costs, the written request presented by Techint “surprised” negotiators at UTE and signaled a “hardening” in Techint’s position according to sources at UTE.

The Uruguayan weekly magazine Búsqueda reported that the project would cost an additional $17 million USD due to errors in UTE’s initial topographic studies for 350 kilometers of power lines between the HDVC frequency converter in Melo and the 50Hz substation in San Carlos.

Elevation and terrain determine the type of power line towers that need to be installed. Of the 900 towers that the project requires, Techint estimated that they would have to change 300, mostly because they did not match the terrain.

UTE opened the conversation with Techint assuming that the company was willing to negotiate the cost overrun. UTE’s technicians estimate that the additional costs Techint faces are between $10 million and $12 million USD. Techint’s request for a significantly higher amount was unexpected.

UTE’s legal team will respond to Techint’s request shortly as Techint must complete the project by the end of next year. For every month the project is overdue Technit must pay a $6 million USD penalty.

Connecting to Brazil’s power grid is one of UTE’s “strategic” projects. It is part of an effort by Uruguay to reduce its dependence on Argentina for power. Once the project is completed Uruguay will be able to import or export a flow of up to 500MW from Brazil (in addition to a smaller pre-existing connection) . That amounts to approximately 30% of Uruguay’s current average electricity consumption.

This Uruguayan Business Reports news article is a summarized translation of a news article that appeared in the Uruguayan newspaper El Observador. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.

UTE tender update: Hyundai HDEC submits technical information and a $3 million USD guarantee for combined cycle powerplant construction bid

Hyundai HDEC will send seven technicians to answer any UTE questions

The Korean company Hyundai Engineering & Construction Company (HDEC) submitted its $3 million USD guarantee and the technical information on its bid to construct a combined cycle power plant in Punta del Tigre, Uruguay.

Oct. 10 was Hyundai HDEC’s deadline for submitting all their documentation on the bid to UTE, Uruguay’s state power company. Hyundai HDEC became the preliminary tender winner after UTE rejected a cheaper bid from the Argentinean company Electroingenería. Electroingenería did not meet the experience requirements of the tender.

Hyundai HDEC has decided to send seven technicians to Uruguay to answer any questions UTE has about their proposal. Hyundai HDEC’s proposal for a 531 megawatts producing plant with Siemens turbines had finished second (behind Electroingenería) in the Competitive Bidding Index. The combined cycle power plant will require a $529.2 million USD investment.

Sources in UTE said that from a technical standpoint, UTE has no “objections” to the equipment proposed by Hyundai HDEC.

Past deception by satellite company may hurt Hyundai

Hyundai HDEC will not escape the controversy that has already surround the biggest tender in UTE’s history. During UTE’s first tender for the project the winner was Hyundai Engineering Company (HEC) a “satellite” firm of Hyundai HDEC, which during the tender process appeared to claim the work history of its parent company rather than its own. Nationalist deputy Jorge Gandini (Partido Nacitionalista) initiated an investigation of Hyundai HEC for presenting false documentation. UTE eventually annulled the tender and initiated a second one.

After Electroingenería, was rejected the parent Hyundai company was named the preliminary winner of the second tender. However, last week at the chamber of deputies industry committee Mr. Gandini demanded to see the work history HDEC presented to UTE. A review of this documentation could prove that Hyundai HEC had submitted false paperwork during the first tender.

“This is very shocking; I will attempt to find out something about these people. But it it’s the same group of lawyers, they have the same address, and therefore they are the same people” said Gandini.

UTE needs to quickly resolve any legal issues because $168 million USD in the Inter-American Development Bank (IADB) funding is contingent on the tender process being “transparent” and “competitive”. Additionally, if a construction contract is not signed this year UTE will lose their 2012 IADB funding quota.

This Uruguayan Business Reports news article is a translation of a news article that appeared in the Uruguayan newspaper El Observador. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.

Uruguayan government has received 12 proposals for regasification plan

The “principal international companies” have all submitted proposals according to ANCAP’s director.

Uruguay’s executive branch is calling their attempts to generate interest in the construction of a re-gasification for ANCAP a “success”. Twelve companies submitted construction plans for the project in Montevideo bay.

Yesteday Oct. 2, Juan Gómez the director of ANCAP explained that the among those interested in the project are “the principal international companies” specialized in marine infrastructure as well as companies with experience operating offshore regasification plants.

“The call [for interest] was a success and demonstrates there is interest in investing in Uruguay”, said Gómez.

Gas Sayago, the joint venture between ANCAP and UTE handling the regasification plant, will now select which companies proceed to the competitive bidding process. That process beings October 20 and be completed before the end of the year.

The tender winner can be a company or a consortium. ANCAP is predicting that construction companies will join together with companies that have experience running regasification plants and submit joint bids.

Gas Sayago’s tender includes construction and operation of the plant for 15 years. The tender winner will receive $120 million USD for the construction and for operating it for 15 years. Uruguay’s government will handle dredging the port of Sayago to improve access.

This Uruguay Business Reports news article is a translation of a news story that appeared in the Uruguayan newspaper El Observador. The original news story is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.

UTE rejects Electroingeniería’s bid for new power plant; Hyundai’s bid new preliminary selection

Electroingeniería lacks the experience for the project

UTE, Uruguay’s state power company, has decided to reject Electoingeniería’s bid to construct a combined cycle power plant in San José because it did not meet the state requirements. The news was an “absolute surprise” to Electroingeniería. Hyundi HDEC’s bid is UTE’s new preliminary selection.

After a month of analysis, UTE’s technical commission decided to reject the Argentinean firm’s bid to construct the combined cycle power plant in Punta del Tigre, San José. Electroingeniería’s bid was UTE’s preliminary selection because it was the lowest cost bid entered.

UTE’s board of directors voted unanimously to reject Electroingeniería’s bid. The technical comission’s report had advised, “electroingeniería has not met the capacity and experience requirements of this tender, since they were never the principal contractor in the background history they presented”. The board of directors concluded “we reserve the exclusive right to judgment [on the contract] and definitively rescind acceptance of this offer”.

The Partido National’s UTE board member, Enrique Antía, told El País that the technical commission’s criticism of the company’s background “was overwhelming” . He stressed that the board’s issue “was not technical problems”.

The UTE lawyers closely investigating Electroingenería’s work history warned the technical commission that the Argentinean company had no experience as a contractor and therefore could not be put in charge of a project requiring a $500 million USD investment and which would eventually produce 580MW, close to half of all Uruguay’s electrical usage.

Mr. Antía, speaking on the board’s decision said “it was not a surprise. There was always a strong belief that technically Electroingeniería was not the best [company] to award UTE’s contract to”.

The Argentinean firm said that the decision was received “absolute surprise, given that our offer is the best technically and economically [it was the lowest bid at $531 million USD], it saves the country $78 million USD”.
Although Electroingeniería admitted that the tender “is a process regulated by Uruguay’s public law”, the business confirmed that they did not know the reasons they were rejected and they “hope to learn the details of the decision so [they] can evaluate the next steps”.

The other firms which participated in the tender speculated the reason Electroingeniería’s bid was rejected was the lower capacity of their proposed turbines. However, the UTE’s board of directors dismissed these claims.

Hyundai HDEC’s bid is now UTE’s preliminary selection

With Electroingenería’s bid rejected, the Korean company Hyundai HDEC is now the preliminary winner. Hyundai HEDC should not be confused with Hyundai HEC, who was barred from the tender after they falsified the work history they presented to UTE.

Hyundai HDEC must present all the technical documentation on their proposed turbines and their previous experience with this type of contract by Wednesday, October 3rd. Once Hyundai HDEC has presented all the documentation, the technical commission has 20 days to study it and evaluate the company’s ability to construct the first combined cycle power plant in Uruguay.

Mr. Antía declared that Hyundai HDEC “has a solid history of constructing power plants with similar characteristics”. However he also stressed that “[the board] is going to review all the information to learn if the company will comply with everything before we sign the contract.”

This Uruguay Business Reports news article is a translation of an article that appeared in the Uruguayan newspaper El País. The original Spanish language article is available here. Uruguay Business Reports translation by Donovan Carberry.

Uruguay’s state-run companies post budget deficit of $1.14 billion USD

Budget proposals submitted for 2013 by UTE, ANCAP, ANTEL, Correos and OSE predict that their total deficit will reach $1.14 billion USD. Most state companies will take on debt to cover the gap.

Uruguay’s six principal state-run business will all run deficits in 2013 according to budgets they proposed to Uruguay’s central government. The budget proposals are expected to be approved.

In every one of Uruguay’s major state-run companies expenses and investment surpassed income. The deficits will force Uruguay’s state-run companies (with the exception of the telecommunications provider Antel which can cover its deficit with cash) to use up saved resources or take on millions of dollars in external financing.

Generally the proposed budgets use conservative revenue estimates but in cases like UTE, which is vulnerable to the changes in climate that affect hydroelectric dams or Ancap which is subject to crude oil price fluctuations, deficits could be higher than predicted.

For the first time Antel is predicting a budget gap of $36.5 million USD. Nevertheless Antel is the state-owned company in the best financial condition because it is holding onto a large enough cash balance to cover next year’s expected shortfall.

UTE also stands out among the state-owned firms. They are predicting a whopping $576 million USD budget shortfall. The state electric company is predicting revenues of $2.066 billion USD and expenses at $2.642 billion, which leaves $576 million USD. UTE expects to cover that difference with $445 million USD in external financing and $131 million of their reserves. The external financing is associated with $370 million in outside investment in UTE’s new projects. The execution of those investment projects is conditional on the allotment of funds by Uruguay’s Office of Planning and Budgeting.

This Uruguay Business Reports news article is a translation of an article that appeared in the Uruguayan newspaper Unoticias. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.

UTE will sign multi-million dollar construction contract for thermal power plant no later than November

The president of Uruguay’s state-owned energy company says “we cannot lose more time”

Uruguay’s state-owned energy company, UTE, has decided to begin construction on a new combined cycle thermal power plant in Punta del Tigre before the end of the year. The project has been delayed by accusations of impropriety arising from the multimillion dollar competitive bidding process. The project is considered “strategic” for UTE to achieve Uruguay’s goal of energy sovereignty by 2014.

The head of the organization, Gonzalo Casaravilla, told El Observador that UTE has decided to sign a construction contract with a private company no later than November. “We cannot lose more time. That much is clear” he said.

Mr. Casaravilla said that if there is any trouble signing a contract with the firm that won the competitive bidding process (the Argentinean company Electroingeniería) or getting it approved by the Tribunal de Cuentas, Electroingenieria will automatically be replaced by the company with the second lowest bid, in this case the Korean company Hyundai. However, they would too would have to be approved.

Mr. Casaravilla told El Observador that it is “natural” for questions to arise about the bidding process since it is a multi-million dollar project. In fact, it is the biggest infrastructure project UTE has contracted out to a private company, but Mr.Casaravilla added that UTE would not let these questions continue to delay construction.

When UTE finally signs a contract with a private construction firm, UTE will have to immediately pay $100 million USD to the construction firm to begin the infrastructure project.

Electroingeniería’s bid was 3.4% lower than Hyundai’s bid for the project which was the second best overall. The Argentinean company proposed charging $531 million dollars for construction and $15 million dollars for continued maintenance. Hyundai bid $529 million for construction but wanted $28 million for maintenance.

UTE will require whoever builds the plant to have the first of the three turbines built within 18 months of starting construction. The plant is scheduled to begin contributing to Uruguay’s grid by the winter of 2014. The second turbine should be completed by the end of 2014 and the third turbine before the end of 2015.

The director of the Eling Group (which includes Electroingeniera among other firms), Carlos Bergolio responded to allegations the company paid bribes for contracts in Argentina by saying “accusations are free” and that all of the allegations that have fallen on the company were dismissed by the justice system. “We have never been on trial”, he said.

This Uruguay Business Reports news article is a translation of a news story that appeared in the Uruguayan newspaper El Observador. The original news story is available here. Uruguay business translation by Donovan Carberry.