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Invesment Projects in Petrochemical,Ethanol Production,Electricity and Telecommunications in Peru
Brief:Peru hopes to attract investment in petrochemical projects to take advantage of high commodity prices as well as Peru's relative abundance of natural gas.

Capital Projects in Petrochemical

Peru hopes to attract investment in petrochemical projects to take advantage of high commodity prices as well as Peru's relative abundance of natural gas. A petrochemical plant would bring benefits in the form of cheaper and more accessible fertilizers and would lead to the additional investment in the manufacturing of value added products such as plastics, textiles, pulp and paper, beverages, cleaning products and many more. The price of urea grew by more than 50% between 2006 and 2007 to US$ 600 per ton.

CF Industries, an American Fertilizer manufacturer and distributor, plans to build Peru's first petrochemical plant. CF Industries has already signed an agreement with Camisea's Pluspetrol which will supply the company with the natural gas needed to power the petrochemical plant. CF Industries has stated that the construction of a petrochemical plant will take at least two years to realize and will most likely be located south of Lima along the coast.

In April of 2008, the government announced that as many as three additional companies planned to invest a combined US$ 3.3 billion in the construction of petrochemical plants in Peru. A Brazilian company, Braskem, plans to invest US$ 2 billion into the construction of a petrochemical plant and the development of a plastics industry in Peru. Braskem is already involved in a petrochemical project in Venezuela with Petrobras and the Venezuelan Corporacion Petroquimico Venezolana (CPV) but hopes to enter Peru independent of partners. Also, Petrobras has plans to invest US$ 800 million in conjunction with Peru's state owned oil company, Petroperu, to develop a petrochemical plant that will produce fertilizers while American owned Terra Industries plans to invest US$ 500 million to produce urea.

Capital Projects in Ethanol Production

Peru was the world leader in terms of yield of sugarcane during the 1960's and 1970's, before the agricultural reforms. The constant temperature and controlled water supply along the coast make it an ideal location to produce sugarcane. On average, Peru produces 132 metric tons of sugarcane per hectare while Brazil produces 72.8 metric tons per hectare, making the return on investment much greater in Peru.

Increasing world demand for biofuels such as ethanol coupled with Peru's superior agricultural conditions have prompted the northern coast to experience a relative transformation in recent years from barren desert land into sugarcane plantations for the production of ethanol (See Figure 6). Maple Gas, an integrated independent American energy company that has been active in Peru since 1992, purchased 10,676 hectares of land in the northern region of Piura for the purpose of producing sugarcane for ethanol. Maple Gas also plans to construct a distillery with the capacity to produce 35 million gallons of ethanol a year and a pipeline from the distillery to the coast and a mooring berth capable of accommodating mid-range dedicated product tankers. The project is expected to take two years to complete and will require an investment of US$ 180 million.

In the region of Lambayeque, the regional government and Cofide, Peru's financial development corporation, recently signed a deal with Spain's Bioterra to build an ethanol plant that will utilize production from the Cayalti sugar plantation. The plant will produce 60,000 million liters of ethanol a year and require an investment of approximately US$ 90 million. As well, Peru's largest family business, the Romero Group, is moving ahead with its plans to construct an ethanol plant on a smaller scale that will utilize 4000 hectares of sugarcane in Piura.

Capital Projects in Electricity

Demand for electricity in Peru has grown substantially in the last two years rising by 7.8% in 2006 and 10.8% in 2007. In 2008, demand is expected to grow again by approximately 11%. Parts of Lima are already dealing with power shortages while some experts believe that broader restrictions on access to electricity are imminent. To this effect, the National Society of Mining, Petroleum and Energy (SNMPE) expects investment in electricity infrastructure projects to increase by 50% in 2008 reaching US$ 983 million. In 2009, the SNMPE expects investment of US$ 1.057 billion. The majority of these investments will go to power generation projects while the rest will be invested in transmission and rural distribution networks. Furthermore, FONAFE, a state organization that manages national funds for state-run entrepreneurial activity, plans to invest approximately US$ 120 million in 22 small hydroelectric and thermal power generation projects by 2011.

Celepsa, a Peruvian company owned by shareholders Cementos Lima, Cemento Andina SA and Corporacion Andina SA, plans to invest US$ 200 million into their El Platanal hydroelectric project in Ca?ete, Ica. El Platanal will become the second largest hydroelectric power generation plant in Peru.

In southern Peru, EnerSur, a subsidiary of Belgian Suez, plans to have its central thermal plant ILO1 operating by 2009. The thermal plant will use residual petroleum and diesel to produce approximately 200 megawatts (MW). The plant will also consist of two desalinization machines that will provide industrial and treated water to central Peru and Enersur's main client, Southern Copper Peru.

One of the major public projects that is expected to be completed by 2011 is the La Guitarra hydroelectric dam in the region of Huancavelica. It will require an investment of US$ 305 million and have the capacity to produce 220 MW of potential energy. The La Guitarra project will help FONAFE provide increased access to energy at competitive prices.

The Las Flores thermal plant owned by Duke Energy, a US company, will use natural gas and have the capacity to produce as much as 197 MW. Public investment is expected to see the Electroperu natural gas thermal plant completed by 2011 which will have the ability to produce 550 MW of energy while the second phase of the MacchuPicchu 2 hydroelectric project should also be completed by 2011. The second phase of the MacchuPicchu dam will require an investment of US$ 135 million and produce 99 MW.

Public electrical transmission and distribution companies such as Electrocentro, Electrosureste, Electronorte, Hidrandina and ElectroOriente plan to develop 175 small energy projects by 2011 requiring a total investment of approximately US$ 90 million. Electronorte will invest about US$ 17 million in electricity transmission lines in the regions of Lambayeque, Cajamarca and Amazonas by the end of this year. The Peruvian government's objective is to provide electricity to 6000 small communities by 2011, which will increase the population's access to electricity from 78% to 91%.

Capital Projects in Telecommunications

Proinversion Peru is actively pursuing investment in four major telecommunications projects at the national level. The combined total investment of all four projects is estimated to be US$ 179.5 million. The first project calls for the implementation of broadband that will benefit 3,010 different rural communities encompassing more than 2 million people in 23 different regions. The implementation of broadband infrastructure will make high-speed internet, public telephones, residential phone services, shared services and applications as well as market competition accessible to rural Peruvians and require an investment of US$ 17 million. The government has committed to co-finance the project making the company with the winning bid for the rural broadband project responsible for funding US$ 13 million and for ensuring the provision, operation and maintenance of the infrastructure necessary to provide the services. Osiptel, Peru's national telecom regulator, will be responsible for monitoring and evaluating the project.

The Rural-Telecommunications – Rural Internet project will require an investment of US$ 11.5 million and involve the connectivity infrastructure to provide internet access to 1,050 different communities in 23 regions. A Canadian company, Ameritel, recently won the rights to this project through a public bidding round with Proinversion. Ameritel will develop the project with its two Peruvian partners, Cime and Valtron.

Proinversion is also trying to attract investors interested in providing broadband satellite services to rural areas as well as those interested in providing the infrastructure necessary to make wireless internet and related services accessible throughout the country. The satellite project will require an investment of US$ 45 million while the Wi-Fi project will require an investment of US$ 110 million.

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