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Chile Infrastructure Report Q4 2011
Business Monitor International, Oct 2011, Pages: 74
Business Monitor International's Chile Infrastructure Report provides industry professionals and strategists, corporate analysts, government departments and regulatory bodies with independent forecasts and competitive intelligence on Chile Infrastructure's industry.
BMI View:
Chile's infrastructure market is fast becoming the most attractive in Latin America, with US$60bn worth of contracts under way or in the pipeline. The sector is expected to reach CLP8,845bn (US$19.44bn) in 2011 from CLP8,168bn (US$16.06bn) in 2010. BMI will therefore be maintaining its optimistic outlook for Chile's infrastructure sector, which will post consistently robust growth of around 4% over the near term.
However, a potential downside to the construction industry in the medium term could arise from political and social uncertainty, persistent barriers to development in the energy sector, as well as economic overheating and inflationary pressures.
Key developments in recent months include:
- French utility GDF Suez announced plans to connect Chile's central SIC power grid to the country's northern SING grid via a new 570km transmission line. The project would certainly help the country's power sector; its four separate electricity-supply systems are not currently linked, hampering energy security and preventing the country from tackling outages effectively.
- In line with BMI's view, the HidroAysen mega-hydropower complex is facing similar opposition and legal challenges as the controversial Belo Monte dam in Brazil. Local courts have filed for injunctions to halt the construction of the dam and while BMI anticipates that work will ultimately commence, based on the slow progress at Belo Monte, BMI cautions that stakeholders are likely to be involved in a drawn out project development process. BMI remains reluctant to incorporate the project into BMI's forecasts for electricity generation and capacity in Chile, as considerable delays are expected.
- The US$2.76bn expansion of the metro in its capital city has been officially approved. The Santiago Metro will undergo significant expansion – with the addition of two new lines and 28 new stations. The project is part of a considerable upgrade, and will bring the total length of the network to 200km. A total of US$900mn in financing will come from Metro, the company which operates the line, and US$500mn from Corporación de Fomento de la Producción de Chile (CORFO), the government's development agency. It is not clear where the rest of the funds with come from.
- The second sale of Chile’s water facilities is now under way, with the auction of shares in Essbio and Esval currently taking place. The Ontario Teachers' Pension Plan, the Canadian pension fund, already has a majority stake in Chile's third largest water utility, Esval SA (69.8%), and also acquired the majority stake in Essbio SA (51.1%) in August 2007. It is now looking to purchase the outstanding shares in both companies, with the auction due to take place by mid-August 2011.
- Chile's Ministry of Public Works said that it planned to sign a concession contract, worth around US$267mn, with Spanish consortium Azvi-Copasa by the end of July 2011, reports BNAmericas. The contract, which requires the approval of the general comptroller, is for a segment of the 187km Ruta 5 highway between La Serena and Vallenar cities in northern Chile. The project involves the construction of 11 overpasses, two service plazas and three rail overpasses, along with the expansion of the highway to four lanes and the reconstruction of the existing Fiscal and Juan Soldado bridges. Work on the project is likely to start in H112, following an engineering assessment during the first year of the concession.
- In August 2011, Chile's Ministry of Public Works announced that it plans to sign a US$30mn concession contract for the upgrade and extension of the passenger terminal at the Cerro Moreno Airport, by the end of November 2011, reports BNAmericas. OHL Concesiones, Agencias Universales (Agunsa), Echeverría Izquierdo, Empresa Constructora Belfi, A-Port Chile and Icafal Inversiones submitted their proposals for the 15-year tender on July 28 2011. The contract, scheduled to be completed in H114, involves construction of a jetway and baggage carousel and the modification and expansion of the existing terminal. In addition, the contract will also require the winning company to construct a new internal access road and develop the sewerage system, wastewater treatment and portable water facilities.
BMI's general view has been that Chile is the least risky infrastructure market in Latin America.
However, the August 2011 protests against president, Sebastián Piñera, and subsequent national strike, may serve to challenge this perception. For now, BMI still expects to see Chile’s construction sector grow by an average 3.84% over 2011-2015, reaching CLP11,427bn (US$26.21bn). Average real growth will edge down somewhat to 3.38% in 2016-2020 as the industry reaches CLP15,698bn (US$37.24bn) by the end of BMI's forecast period.
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