Xstrata Copper and Origin Energy Limited (Origin) have completed a transaction under which Origin has acquired a 51% interest in Xstrata Copper's Energía Austral hydroelectric development company in Chile. Xstrata Copper will retain a 49% stake, whilst introducing a partner with a demonstrated track record, expertise and experience in hydropower and renewable energy to support Energía Austral's development.
Under the terms of the agreement, Origin has gained majority ownership of Energía Austral and will progressively invest over the next several years project development costs of US$75 million for the completion of a detailed project feasibility study, and, if the project is deemed feasible, an additional US$75 million towards a final investment decision. Xstrata Copper will be entitled to deferred payments by Origin Energy when the project is operational and if certain revenue threshold targets are met.
Energía Austral's hydroelectric projects in the Aysén Region of southern Chile have been designed under Xstrata's industry-leading sustainable development standards. They comprise up to three hydroelectric plants – Cuervo, Blanco and Condor - with capacity of approximately 1,000 MW that will deliver clean energy through a new transmission system to the nation's Central Interconnected Grid (SIC). At full capacity, Energía Austral's hydropower supply will avoid the generation of three million tonnes of carbon dioxide per annum compared to fossil fuel electricity generation.
Xstrata Copper Chief Executive Officer Charlie Sartain said "We are delighted to secure Australia's leading integrated energy company as a partner in Energía Austral. Origin has impressive international energy industry credentials and a demonstrated commitment to the highest levels of sustainability.
"I am proud of the fact that our Energía Austral team has developed strong, respectful relationships with our stakeholders in the project over the past five years. I am confident that with Origin's contribution and our continuing support, Energía Austral's projects will now be successfully advanced to the next stage of development to provide an economic and social stimulus for the Aysén Region and a long-term, clean source of energy for Chile."
Origin Managing Director Grant King said "Energía Austral will play an important role in providing the nation with an efficient, flexible and reliable supply of electricity from a renewable source.
"Origin's investment in Energía Austral is consistent with our company's pursuit of a portfolio of renewable energy opportunities in markets with attractive growth options. It also complements Origin's existing footprint in Chile through its 40 per cent interest in the nation's leading geothermal exploration company, Energía Andina."
Energía Austral General Manager, Mr Alberto Quinones, said, "Origin's investment in Energía Austral, which follows our extensive assessment of the projects' technical, environmental and social aspects, represents a significant milestone in the development of these important electricity generation projects."
Energía Austral's projects are situated in an area of reliable rainfall and stable water flows, making it ideal for hydroelectric power generation. The projects are in the feasibility study stage and we anticipate a final investment decision to proceed to construction in 2015/2016.
Energía Austral has the potential to contribute substantially to the social and economic development of the Aysén Region. During construction, a workforce of approximately 4,000 people will be required, providing significant local opportunities for employment and suppliers. The projects also include initiatives to promote tourism in the region.