There is a wide range of reasons for considering the Venezuelan electricity sector as a privileged area for investment. Venezuela has the highest per capita rate of power consumption in Latin America and is favored by abundant sources of generation: vast rivers systems for hydroelectricity and a plentiful supply of fossil fuels for thermoelectricity. Electricity generation showed a month on month increase in 2000 thanks to a similar growth in the economy. In Venezuela, the electric power industry consists of 12 utilities, of which 7 are private and 5 are in the public sector. The state companies lead the industry in terms of operating capacity and generation, accounting for about 87% of the national capacity. In hydroelectricity, public sector companies have an absolute monopoly generating 100% of the power from this source.
The largest state company is Electrificación del Caroní (CVG - EDELCA) , with 63% of operating capacity and 79.4% of the power generated by the public sector. In second position is Compañía Anónima de Administración y Fomento Eléctrico (CADAFE), which controls 27.3% of the national operating capacity and generates 33% of the country’s electric power. In the private sector, 92.9% of operating capacity and 91.4% of power generation is concentrated in the hands of La Electricidad de Caracas (ELECAR). According to calculations by the Venezuelan Electricity chamber Caveinel a block of state owned utilities - CADAFE and regional subsidiaries Enelven- Enelco and Semda require around $5 billion over the next five years to upgrade. Over the past decade electricity companies have been cut out of national budgets as disagreements over privatization dragged on. According to Venezuelan law companies which are slated for sale cannot receive government investments.
In view of the State’s inability to meet these requirements, the Chavez administration is planning to transfer a block of electric utilities and assets to the private sector in 2001, as part of the State restructuring process. The Venezuelan Investment Fund (FIV) is responsible for the privatization and restructuring of state-owned entities, pursuant to a national executive mandate and ruled by its own legislation and the Privatization Law. The FIV is currently responsible for the privatization of Enelven-Enelco and Semda. Enelven-Enelco based in Maracaibo, Zulia state, will be sold as an integrated block by the FIV, which is arranging to offer 51% of the stock of the two companies in a public bidding process. The two companies, which generate, transmit and distribute thermoelectric power, have a joint operating capacity of over 1,370 MW and a potential market including major industrial customers, such as the oil industry. The company says that it needs $780 million to be able to compete once deregulation arrives. The FIV will also auction off Semda, a small generation and distribution company in eastern delta Amacuro. The government has now decided not to sell off Enelbar based in Barquisimeto, the capital of Lara state located in central-western Venezuela, which basically covers the demand in its own state.
Also in doubt is the sale of the Planta Centro thermo-electric plant. With an operating capacity of 2,000 MW, this plant is the largest in Latin America. The complex is valued at approximately US$ 800 million, although studies by CADAFE recommend an additional investment of US$ 60 million to install up-to-date technology, adapt the plant to environmental regulations and raise efficiency.
Venezuela's most recent experience with electricity privatization was the sale of the Nueva Esparta State Electric System (SENECA) on Margarita Island in 1997.
Further progress for the sector was seen with the approval of a new electricity law in 2000 that opens up a path to the deregulation of the sector by mid-2001. Both private and public electricity companies now have to be split into separate transmission, generation, and distribution companies in order to make the sector free-market oriented.
"The electricity law is very advanced," says Oswaldo Artiles , president of state-run power company CVG - Edelca . "Activities like generation and commercialization will be subject to competition and transmission and distribution will become much more efficient." Any local or foreign power company will now be able to enter Venezuela's electricity market and offer power at competitive prices. Edelca, founded in 1963 is the country's largest power generator and hopes to become not only a powerhouse for Venezuela but also for the region by exporting to Colombia and Northern Brazil. A high voltage electricity line is currently being constructed to northern Brazil for this purpose. "The line was originally started to supply mining communities on the border. Then we realized we needed to improve supplies to border communities and take advantage of the state of Roraima in northern Brazil," says Antonio Rojas Suarez , the governor of Bolivar State where the line begins.
Currently Edelca operates Guri, Macagua with an operating capacity of 2,454 megawatts (MW), which saves the country 28 million barrels of oil annually at an estimated value of US$ 500 million, and soon to come on line; the Curuachi dam at a cost of $2.8 billion and 1,100 MW per hour. In addition Edelca hopes to begin construction in 2002 of the Tocoma dam with a further 1,100 MW per hour. "In the Caroni river area we will have an average production of 17,000 MW equivalent to 500,000 barrels of petroleum per day," says Edelca's president Artiles .
VENEZUELA
Electricity
