VENEZUELA, learns to diversify after turbulent political times LATEST REPORT April, 2002
Venezuela emerging from a difficult decade
Interview with
Oswaldo Artiles Centeno President of C.V.G. Electrificaciòn del Caronì C.A. Edelca
For World Investment News Ltd, 27th November 2000.
Since 1963, when the company was founded there have been many changes in Edelca’s objectives. At first, it seems like the company was part of the strategic economic diversification of Venezuela within the Guyana region, by amplifying its objectives throughout the whole country and other sectors and recently initiating the interconnection with Colombia as well as the start of the transmission project in hydro-electricity with Brazil. With this in view, what would you say underlined the corporate philosophy of Edelca today and its future objectives?
Edelca has always been an electrical services and construction company. When it was established it focused on generation plants and transmission lines oriented towards toward the development of the Guyana region. Since 1953, the commission for the hydroelectric development of the Caroni River began constructing the first central plant, Macagua 1, with an installed capacity of 360,000KW, one third of the country’s supply for that era. The plant began its service by 1959, it has been operational for 41 years, and was conceived as a support of electricity supply for the Orinoco siderurgy and later for the Aluminium industry. By 1963, Edelca is established and begins the first phase of the Guri Hydro-electrical plant, whose final phase culminates with the inauguration of the plant with a capacity of 10,000,000KW. Through out the whole time between 1963-1986, Edelca is transformed form a regional company to one with a national projection. Even though the generation plant is in Guyana, the associated energy transmission system is also developed allowing the electrical energy to be transported throughout Venezuela.
Our philosophy is to supply the electrical energy to our clients with the highest quality service and competitive prices. We are wholesalers; we sell to the distribution companies and large industrial consumers such as Aluminium, steel and petroleum. Our aim is to sell electrical energy in blocks. Obviously a company that generates 70% of the country’s energy and transports from Guyana to the furthest stretch of the national grid, Maracaibo, has a great responsibility towards the whole nation. Its infrastructure operates under the strictest criteria of quality and efficiency. In this way, we have to have the most state-of-the –art operational and maintenance systems in order to reach our goals. Of course, it is important to be a company with strong investment plan towards the future growth of the national electrical system. Everything in the company is conducted under the strictest regulations of quality control; from the engineering to the construction the objective is to offer a quality service.
More and more, we are becoming an operating company. That company that was once a construction company has evolved to become an operational electrical service company. This is now the tendency, to be a service company. In the area of construction, although still important, has less of a future than its initial stages.
Can we speak a little about the present active projects: Caruachi?
Caruachi is our fourth project in the Caroni River. The first was Macagua 1, and then came Guri followed by Macagua 2 and 3. Caruachi is approximately a $2.400 million project, creating employment for 5,000 people. It is a project whose energy will be 11,000 GW per hour of electricity. This basically means that the energy consumed by a city like Caracas in one year is a project of considerable size. The project is incredible, taking into consideration that the demand will increase. We hope that there will be a substantial growth in the economy next year that the economy recovers ready for the commercial operations of Caruachi in 2003.
There is another project: Tocoma. What will this new plant entail? Will the lower Caroni merge with Tacoma? Are there possibilities of greater development? – The Projects of Upper Caroni? Could you tell us more about these?
Tocoma is a similar project to that of Caruachi in capacity of energy generation, a project of 11,000GW per hour. Tocoma is still in the project phase. It is necessary to know the elements that form the Energy plan of the country, how the Gas and thermo-electricity develops. We are presently working on the engineering to reduce costs and be more competitive with other sources of energy. Nevertheless, I estimate that we will begin the project in 2002 and should be ready for the year 2010 and 2012, we are going to do the project much faster, and it will take about 10 years. The dates are tentative! The Tocoma project will complete the lower Caroni. In this 100 Km of river the is a production capacity of 17,000 MW, some 85000 GW, this is the equivalent of 500,000 barrels of petrol daily; this amount could be used for exports. Naturally, these projects are of great national interest.
The Upper Caroni has various possibilities but in remote areas, these will be developments towards the year 2005-6. There is one near Guri that is the Tayucay but we are adapting the dimensions of Tayucay, Aripichí y Eutobarima all of which are projects of the upper Caroni. We estimate there to be at least 9,000mw more. It is evident form the ecological perspective that the area is delicate and would need special attention.
As you are speaking about the environmental laws of protection. You have won the first battle of the conflict of the Interconnection line with Brazil- but as we noted in our conversations with the Governor of Bolivar, there is still a group of people opposing the project which is causing a delay, how best could you describe the projects ability to help the indigenous communities? Are we correct in assuming that a percentage of the generated electricity was to be offered to them?
This was a project originally intended to aid with the development of Mining in las Cristinas, called Minca created by Pleasure Dome and CVG. It is a 400KV line starting at Macagua and finishing at Las Cristinas- found at the south of Cuyuni. Later, with a decision from the National Executive Committee the idea came of providing for Santa Elena de Uairen found approximately 200Km from Las Claritas. This was needed to improve the standard of living of the people of Santa Elena de Uairen, this is essential in the strengthening process of this border state. This in turn will help strengthen the supply of energy of the villages from Upata to Tumeremo as well as El Callo.
We then started to stretch to Boa Vista, in Brazil, which gives more incentives to the project growth from Las Claritas to Santa Elena, consequently making the project more attractive. Evidently, the project has an environmental issue, which is delicate. We are aware of this. Edelca is a company with a strong focus on the environment; it has the highest importance and part of our continuing strategy. Water is our top natural resource coming from the Caroni River, covering an area of nearly 100,000 Square KMS. This company has the hydro-meteorological register of the last 50 years. We have a network that measures hydrological and climatological variables-this supervises the way the Cuenca works and monitors any imbalance that we may see. We have a fire brigade that monitors carefully all operations, as in the past there has been a fire in Brazil and it is vital to our business to have top caution in this area. We care for the natural welfare of nature, animals and the local communities. The future of our culture can be protected if we protect the future of the communities. If we can take care of the people, then there is no need for our work to be interrupted.
In September of ’99, the law that regulates the electricity sector was approved- in turn the laws have been liberalised for generation and commercialisation of electricity maintaining regulated the distribution and transmission. What is your opinion of the regulatory law and what do you think it will achieve?
Well, the electrical laws had 2 prior mandates. The first, Decree 1558 based on a model of economic activity divides. This was the 1996 decree, where the economic model guidelines were drawn out. At that time Edelca was working on a format to separate transmission and generation activities. The strongest area for Edelca is the transmission where the country is connected as well as Large-scale Hydro-electric generation. We started separating various areas in order to complete with the decree’s requisites. However, the decree did not have the same support as a law would have. The electricity law, which was promulgated some time ago in 1999, is a law that we considered being very advanced; it is based on an economic model of diversified company growth.
The law separates areas subject to competition such as generation and commercialisation from areas bound for regulation for obvious reasons. The transmission of the distribution is done via cables that function in a more transparent and efficient manner. We have developed an institutional model where we follow the clear guidelines of the Ministry of Energy and Mines. In relation to the planning and liquidating of tariffs, the National Electrical Energy Commission which is a great fiscal regulator. The National Centre for Management (Centro Nacional de Gestión) an operations office will be the body in charge of operations with the highest-level security also within the wholesale market, the economic and electrical markets. It also fixes the role played by the municipal areas. This institutional model was very much needed as up until then everything was too dispersed, as there were too many companies in control of the electrical sector. The laws have stipulations which have to be completed but at present are being confirmed. We hope to see the final laws soon. By September 21st, 2001 we will be separated into various companies. Edelca is trying to conform as quickly as possible to the laws. We will probably end up as 4 companies. One as an interconnection company in transmission and the generation company that will be still known as Edelca, CVG Electrificacion del Caroni C.A. We have been proposing a distribution as we have only a few segments of business in distribution. This will be focused in Guyana, which could well be the start of larger operations in distribution; this could eventually cover the whole state of Bolivar. We also want to propose a regional transmission company whose objective will be to interconnect all our plants and serve our largest clients. There is also a possibility that we will begin a venture in Telecommunications, which will be a strategic association with a private investor. Although it still has not been approved, eventually we may end up with 5 companies.
What kind of profile will the company that will join you in the strategic alliance have or should have?
We have a telecommunications system that we use through our network. The new Telecom law suggests that you should give the rights to any interested party, or your transmission line. We see, with this platform that the most ideal business for Edelca would be a transport Telecommunications company. We need a partner who can provide technology, market and investment, as we have to enlarge the network to complete it. I think it is a good business not only for Edelca but also for the new partner. This is the business of the century. The network is available and has an infrastructure that offers a lot.
In Venezuela there are 13 companies in the electrical sector, 5 are public and 8 are private I have a difficult question for you, could you give me a comparative opinion about the distribution business in both sectors about the efficiency, stability and profitability. Do you really feel that privatisation of this business is necessary?
The distribution business is regional; it is a business that should develop in each region as for example the differences within supply, development and the consumer. Investment should also derive from those individual regions. CADAFE is a state owned company, which centralises the distribution. I think that it should be divided up into various companies in the separate regions throughout the country and dealing with the particular needs of each region. By law, distribution is a business of that admits alliances I do not see why it cannot be private hands. I don’t se why it should be public sector as this always has difficulty with investment and development. If they had private capital, could offer technology and new management styles they would benefit greatly. If we compare some private distribution companies, for example, I think that the tendency in a free market like ours, I see no reason why there should not be private companies. Seneca has been an interesting example of how a company with difficulties at the beginning has invested and the result has been the success of solving the problems in Isla Margarita. I personally feel that private capital could enter there. As I previously said, you have to bring technology, market, financial resources and management.
Today, the government is interested in creating the most of the potential in the gas sector, up until now you have been involved in Hydro-electricity…
One of the weaknesses of Venezuela, to coin a phrase, is that it has a concentrated area of generation in the lower Caroni. We, as a company in the electrical sector believe that there should be a more diversified offer of generation. One way of creating diversity is precisely with gas, which fortunately can be found in the north of the country. Venezuela is fortunately an energy nation. It has electricity in the south and gas in the north. The states is creating a gas law with the aim of using gas for electricity generation and guarantee the supply installing thermo-electrical plants with modern efficiency. From a strategic point of view, the aim is to gain a greater security system. In simple terms, diversify the sources of energy so as to not depend solely on the south. I think that the Minister of Energy and Mines has given a very solid step forward. However, there is a need to grow at least 14%, the thermo-electric generation has to be supplied with gas which is the most efficient way. The liquid combustibles are very expensive; I see a bright future for gas. But Edelca will continue with its hydroelectric generation.
The proposal for example of creating long- term sustainable and renewable energy such as solar energy seems unrealistic or is it a possibility?
I suppose that under a small scale it is possible. All aeolic solar or micro centres have always been done on a small scale. There are no large- scale projects anywhere in the world. For certain areas in the world it could be a feasible solution. The tendency worldwide is to focus on the energy sources and offer more each time I the areas of consumption, but this technology continues to be expensive. The ministry of Energy and Mines overlooks all areas of the energy sector and this is one which is not presently in place but that should not be dislodged from future development if necessary
Finally, you have spoken about the goals of Edelca towards the end of this year with the separation of Edelca into separate companies. What will be the projects that are ready once the company has divided?
We are in the process of developing various projects, we have the transmission project, the distribution company, the telecommunications company, regional transmission and the company I generation. We have a program that coordinates all of these. Although, we are going to have a lot of activity, the task of dividing the company is very difficult. We have to separate activities but we have a solid communications network and management skills, are people are well prepared and know how to work integrally. The truth is we have to work very hard, but I feel that we will get there successfully. We will complete the goal of 21st September 2001. We have been preparing for this for 5 years and of course, we will keep moving steadily forward with Caruachi. We also have to finish the southern line to Santa Elena, the continual growth of our transmission system form east to west. Finally, we are devoted to the goal of producing energy for Venezuela. The company is executing all its programs and as we are dividing up, it is going to be a fun and interesting year.
NOTE : World Investment News Ltd cannot be made responsible for the content of unedited transcriptions.
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