Electric Power - Brazil - Chesf: Task force to submit concession renewals review soon

Brazil's government task force analyzing the procedure to renew hydroelectric concessions is due to present its report to President Luiz Inácio Lula da Silva very soon, according to a top industry executive.

"What I heard is the group is putting the final touches to deliver a preliminary report to the president," said Dilton da Conti Oliveira, president of federal power company Chesf.

"I don't know whether the government will renew concessions or not, but I believe whatever the decision, it will go for all states and private companies," he said in Rio de Janeiro at the 12th Brazilian Energy Congress.

The company has eight hydro plants with total installed capacity of 9.2GW whose concessions expire in 2015. In addition, the 1.05GW Sobradinho hydro plant's concession terminates in 2022.

Chesf criticized the São Paulo state government's stance in the case of its power generator Cesp.

"The state government wanted special treatment for Cesp so it could go ahead with the auction to privatize the company," Oliveira said.

The auction failed last year on fears Cesp would not get concession renewals for its Jupiá and Ilha Solteira plants. The two plants have a combined capacity of 5GW and their concessions expire in 2015.

The government automatically renews concession rights at no cost after they first expire. The second time they expire, the government launches bidding for the concession.

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Infrastructure - El Salvador - Camarasal: Don't modify original proposal to privatize La Uniуn-Acajutla

The original concession scheme to privatize El Salvador's La Unión-Acajutla port complex should not be modified because it has attracted the interest of multiple concessionaires around the world, industry and commerce chamber Camarasal president Jorge Daboub told BNamericas.

The El Salvadorian government's original proposal was to privatize the complex under a two ports, one operator model.

However, the proposal was rejected by the political opposition, and on July 29 President Antonio Saca appointed vice president Ana Vilma de Escobar head of a special committee responsible for creating a new privatization model.

On October 9, Escobar announced the government was preparing a decree to privatize the port under a mixed public-private concession plan.

"We believe we should not degenerate the original proposal. We are treading a fine line between making the project interesting or unappealing to international investors," Daboub said.

"Camarasal believes this is a valuable project, especially over the next two years, which will be marked by financial uncertainty and growth problems in almost all of Latin America," he added.

"We cannot allow this opportunity to go to waste. We cannot make mistakes and later lament that we did not realize its potential," he said.

El Salvador is in the middle of a presidential election and that makes projects such as La Unión-Acajutla hinge on political issues rather than technical arguments.

"We are convinced the best option is a master concession but that option has been discarded and now a mixed concession is being considered, which contemplates roughly 10% state participation," Daboub said.

To raise public awareness on this issue, Camarasal has launched a campaign to promote the advantages of privatizing the port to a world-class operator, showing how that would mean more employment.

"We are looking at Peru's experience with the expansion of Callao port, and how Dubai Ports World has created thousands of jobs. We are exerting pressure to ensure this project is completed in a satisfactory fashion and developed with a technical and economic vision, not with a political and ideological one," he said.

La Unión port is currently under construction by national port authority Cepa and slated for completion in November. The entity has invested US$161mn so far, and works are 83% complete.

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Mining - Chile - Kinross to buy 100% of Lobo-Marte gold project for US$250mn

Toronto-based Kinross Gold (TSX: K, NYSE: KGC) reported it has reached agreements with Teck (TSX: TCK) and Anglo American (LSE: AAL) to acquire 100% of the Lobo-Marte yellow metal project in Chile's region III for US$250mn plus a royalty.

"This acquisition is directly on our strategy of strengthening Kinross' presence in our core operating regions and adds another attractive deposit to our development portfolio, while giving us access to a further 30,000ha for exploration in a highly prospective, mining-friendly district," Kinross CEO Tye Burt said in a statement.

Kinross signed a binding letter of intent with Teck whereby the former will purchase the latter's 60% interest in Lobo-Marte's controller - Minera Santa Rosa - in exchange for 5.6mn common shares of Kinross, roughly US$40mn in cash and a 1.75% net smelter return royalty on 60% of future output payable to Teck when gold reaches a price of US$760/oz or more, the statement said.

Also, Kinross agreed to acquire Anglo American's 40% stake in the project for US$140mn in cash.

On November 18, Teck's 60-day right of first refusal on Anglo American's stake expired.

According to Kinross, Lobo-Marte has 97.7Mt grading 1.72g/t gold, or 5.4Moz in indicated resources, and 9.25Mt grading 1.56g/t gold, or 500,000oz in the inferred category.

Kinross' shares in New York were trading at roughly US$11.40/share Thursday afternoon.

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Petrochemicals - Brazil - Anda: Fertilizer sales to drop 5% in 2008

Brazilian fertilizer distributors association Anda expects domestic sales to fall 5% in 2008 compared to last year due to the global financial crisis and the resulting lack of credit.

In October, 2.31Mt of fertilizers were distributed in Brazil compared to 3.15Mt in the same month of 2007.

"This year was good up to September, but credit restrictions hit the agriculture sector after that. October historically is a time when demand for fertilizers is highest but this year it registered a significant drop," Anda's executive director Eduardo Daher told BNamericas.

Initially, the fertilizer sector was expecting record deliveries in 2008 and growth of 4-6%. "Now I don't think we can even reach 24Mt. It will be a victory if we finish the year close to that," Daher said.

According to the executive, the government has announced plans to free up credit for the agriculture sector, but producers have yet to see it.

In addition, the fall in sales caused an increase in fertilizer stocks, which totaled 6Mt in Brazil at the beginning of the fourth quarter. "Usually at this time of the year stocks stand between 2.5Mt and 3Mt to supply the first quarter of the following year," Daher said.

Even though the fertilizer industry cut production and held off on imports, stocks are high because the sector is not able to deliver, according to the executive.

"We have registered record sales since 2007, but 2009 and 2010 are going to be weak," Daher said, comparing the next two years to 2005-06, when Brazil's agriculture sector faced a difficult period due to a weak currency, drought and soybean rust.

According to Daher, it is too soon to make predictions about next year. "We have to wait for the results from November and December."

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Privatization - Chile - MOP postpones opening US$46mn Llo-Lleo bridge as structure sinks

Chile's public works ministry (MOP) has pushed back the inauguration of the US$46mn Llo-Lleo bridge, which connects to a new access highway to San Antonio port in region V, a MOP official told BNamericas, commenting on press reports.

MOP officials were to inaugurate the initiative around this time, but it has been postponed indefinitely due to technical problems which arose when some of its pillars sank.

The structure, built by Spanish concessionaire OHL, will allow trucks to bypass the town of Llo-Lleo.

The overall project cost US$210mn and comprised the construction of a four-lane highway connecting the Aguas Buenas feeder road to the port, including a tunnel known as Trinchera. Another road was built to connect the Independencia area with the highway known as Camino de la Fruta, the official said.

Part of the project is already operating, including the tunnel. However, the Llo-Lleo bridge access will not be approved by MOP until OHL solves the technical problems.

According to the official, the structure's southern pillars are in perfect condition.

The sinking of the northern pillars is allegedly due to the terrain. Locals criticized authorities for not noticing this before allowing the bridge to be built, the official added.

Civilians and political sector officials also criticized the concessionaire, arguing the terrain's characteristics should have been noticed during technical feasibility studies, local press reported.

Residents pointed out there are no houses in the area where the bridge was built because of the poor quality of the land.

A temporary bridge built by authorities in the 1980s suffered the same problem, press reported.

According to the concession contract, OHL was responsible for carrying out the necessary studies to determine the feasibility of building the bridge on the site. The firm is also responsible for carrying out any complementary works necessary to solve the bridge's structural problems.

MOP is working together with the concessionaire to evaluate options, the official said.

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Infrastructure - Argentina, Chile - GE: Rail terrific long-term option in big countries with natural resources

Rail technology is a great long-term option to transport resources and products in countries like Argentina, Brazil and Chile, General Electric (NYSE: GE) vice president John Rice told BNamericas.

"If you have a country that covers a lot of space and has a lot of natural resources that need to be moved, then rail is a very cost-effective option," said Rice.

Rice said GE sees potential to expand its business in the rail sector in countries that fit this description.

Rail systems are not inexpensive to build, but their long-term, cost-benefit relation is good. "There is a substantial capital investment but [railways] last for centuries in some cases," he added.

Also, the payback over time from using rail transport is "terrific," Rice said, arguing that the relation between cargo handling capacity and operating costs - including fuel - is extremely competitive.

Of the three countries mentioned by Rice, Brazil has the most developed cargo handling rail infrastructure network.

Chile's main rail network is currently operated by state-owned firm EFE, with some private firms operating lines to transport resources, such as minerals, to ports as well as to other areas like the Andean region.

Currently, Chilean authorities are considering concessioning part of the main rail network to private firms in an effort to boost their competitiveness.

In Argentina, on the other hand, since the administration of former President Néstor Kirchner, government officials have threatened to nationalize cargo handling rail systems.

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Chile and Argentina are currently analyzing a rail concession project consisting of the construction of a US$2.5bn-3bn low-altitude rail tunnel to connect central Chile to Argentina in the Los Libertadores Area.

Argentine firm CASA and Brazilian company Camargo Corrêa submitted the project as a private initiative and are carrying out feasibility studies.

One of the concerns among private players is the uncertainty regarding the future of private investments in Argentina. The country has already nationalized a number of concessions and has installed obstacles that have discouraged investment.

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Other countries looking to improve their rail networks with the support of private capitals include Uruguay, Paraguay, Peru and Colombia, which have all met with investors and rail specialists to analyze and promote development initiatives.

Government officials from these countries have also met with multilateral financial entities seeking financial support for these initiatives.

GE's infrastructure division manufactures signaling and communications systems for the rail industry, as well as freight and passenger locomotives, and locomotive parts. The firm also provides locomotive services.

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Oil & Gas - Brazil - Petrobras: Parque das Conchas to produce 100,000b/d in 2009

Brazil's federal energy company Petrobras (NYSE: PBR) expects its Parque das Conchas offshore project in the Campos basin to start operations in 2009 at a rate of 100,000b/d oil.

"It's one of our major projects for next year," company E&P general manager José Jorge de Moraes Júnior said in Rio de Janeiro on the sidelines of the 12th Brazilian Energy Congress.

Parque das Conchas is in an area formerly known as BC-10 and previously was scheduled to begin operations in 2010.

Anglo-Dutch oil company Shell (NYSE: RDS-B) operates Parque das Conchas with a 50% stake. Petrobras holds 35% and Indian group ONGC the remaining 15%.

Meanwhile, output at the Frade field, operated by US oil major Chevron (NYSE: CVX), is due to start in 2009, according to Moraes. Petrobras has a 30% stake in Frade.

Chevron previously has said Frade could reach 85,000b/d in 2011.

Production from foreign oil companies will reach 400,000b/d in Brazil by 2012, Moraes said.

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