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Uruguayan Market ready to expand as first tender winners named

URUGUAY: After a lengthy process designed to prevent corruption, and three months later, the three victorious bidders have been announced.

Uruguayan state electricity company Usinas y Transmission Electricas (UTE) finally ended the nation's drawn-out tender process in mid-March with the award of three 20-year 50MW contracts for wind farms across the nation.

The winners were Consorcio Venti, the local unit of Argentine metals firm Impsa; Fingano, whose shareholders include Spain's Grupo Empresarial San Jose and Argentina's Grupo Eurnekian; and local firm Palmatir which belongs to Spain's Abengoa. Most of the bidders proposed prices between $80-90/MWh.

The decision comes after close to two months of contestations from five of the 15 firms involved in the process. Tender winners now have three years to deliver their facilities.

Venti's contract, worth just under $317.7 million, will deliver power at $84.93/MWh and will be set up on the mountains that link the region of Maldonado to its northern neighbour Lavalleja, according to documents published on the UTE website. It plans to use Vensys 77 1.5MW turbines.

Fingano's contract was for just under $316.2 million at $84.53/MWh to be set up close to Uruguay's highest point: Cerro Cathedral in Atlantic coast department Maldonado. It presented plans that could use either Gamesa's G80 or Vestas' V80 2MW turbines.

Palmatir's contract is for just over $323.9 million at $86.60/MWh to be set up in Peralta, a village close to the Rincon del Bonete Lake in central state Tacuarembo. It plans to use either Gamesa G90 or Vestas V90 turbines, which also produce 2MW.

Prices for the 21 offers made ranged from $81.16 to $116.56/MWh. A total of 945MW of capacity was offered, with proposed park sizes ranging from 30-50MW, in line with the terms of the tender.

Uruguayan media have complained that the process took much longer than forecast, following a postponement of the decision which was initially planned for December.

"Uruguay has a long history of processes that are slow but orderly," says Gonzalo Arauz, investment officer at the International Finance Corporation, a World Bank subsidiary. "The process is unusually slow in Uruguay because they are seeking to avoid corruption accusations."

"It is a first tender and there will always be stumbling blocks," says Timothy Stephure, analyst at Emerging Energy Research. "First tenders have problems even in developed markets."

Uruguayan authorities are using transparency as their main anti-corruption tool. UTE published detailed documents on the tender this year on its website, and regulator the National Energy Directorate published seven reports about the process between February 2010 and March this year, ahead of the final decision.

Arauz estimated that the tender took 18 months from start to finish. It was made more complex because UTE wanted developers to present plans for overflow power connections that would come into operation should their project's production saturate existing transmission lines.

"Uruguay is a small market, so there is less room for error," Stephure added. "This 150MW tender could well reach much of the population of Uruguay."

In January, electricity minister Ramon Mendez told the media that the nation sought to have 500MW of wind installed by 2015, estimating that in peak conditions this would represent 70% of Uruguay's power needs. UTE is set to launch a tender for a further 150MW this month and already has 26MW in place. It plans to build the remaining capacity without a tender.

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