TBY talks to Tito Sanjurjo, CEO of EGE Haina, on the expansion of generating capacity, the potential of wind energy, and co-projects with mining companies.
THE BUSINESS YEAR What were the main factors behind EGE Haina’s impressive revenues in 2011?
TITO SANJURJO The company has invested in technologies that allow us to generate energy more efficiently. I think that has been the key to our success, and although we are still burning oil, we are burning it in a very efficient manner. Additionally, the company has invested in building a coal facility that was a part of the acquisition when we purchased shares of the company from the state in 1999. We now have a coal plant that allows us to divorce ourselves somewhat from oil. In 2011, EGE Haina installed the first wind farm in the Dominican Republic. That shows our commitment to continuing our investment in energy despite the challenges that are associated with doing business here in the energy sector, as well as our focus on renewables as a way for the Dominican Republic to, as whole, reduce its dependency on imported oil. In December 2011 we kicked off the construction of a new plant, which will be a duel-fuel plant burning either oil or natural gas. That will give us the flexibility to use the best-priced commodity at the time.
What is the potential for wind energy in the country?
We inaugurated the first phase of Los Cocos in October 2011. It was a 25-megawatt (MW) power plant investment of over $100 million. This investment has been very successful. We are meeting our production expectations and continue to see good results from the wind farms. For that reason, and because the wind resources in this area are world class, the company decided to expand the wind park. We are investing another $100 million to expand the capacity of the plant to 77 MW because we already have the infrastructure. In the first phase we had to put in the infrastructure of transmission lines and substations, and we had to do some roadwork, but that is already in place. Now it is just a matter of the wind turbines and some internal roadwork to the wind park. That allows us to grow incrementally with marginal investment. As a matter of fact, we are installing 52 MW for the same price that we were producing 25 MW before, so that helps us tremendously.
What are the savings of oil that the country will get from EGE Haina’s investments in wind energy?
Phase I will probably mean about 200,000 barrels of fuel savings annually. At today’s prices of close to $100 per barrel, that is $20 million worth of savings. Phase II will be more than that at close to 500,000 barrels worth of savings. More importantly, however, is the CO2 emissions savings. We are saving 70,000 tons of CO2 emissions in Phase I and double that for Phase II at 150,000 tons. These are very significant savings and this is very good for the environment, too. Those are the kind of non-monetary results that are also present.
What factors led to your technological partnership with Vestas and Gamesa?
We are using the latest technology of both Vestas and Gamesa, and we have extremely good relationships with both companies. We now have a year of operation with Vestas wind turbines under our belt, and they are performing remarkably well. We have nothing but good things to say about our relationship with Vestas and how they have supported us during the construction and operation phases. For Phase II the company selected Gamesa for a variety of reasons, not least because we enjoyed a very positive experience with them during the construction phase. The engineering, procurement, and construction (EPC) contract was made with Cobra, a Spanish company and member of the ACS Group. Cobra has done both EPC and provided the expertise that it has from its installations in Europe. It provided a high-quality installation that was completed on schedule. EGE Haina had no experience in wind farming in the country, so our partners brought experience with them and this knowledge transfer gave us the confidence to initiate Phase II. The target date for the beginning of Phase II is December 2012.
What special challenges has the company faced in establishing the first wind farm in the country?
Being the first there is always some fear and uncertainty, and unfortunately people play up those fears. These investments are challenging because you do not have local experience to point to. Now that the wind farm is operational, we have even taken those who are critical of the noise or wind power equipment out to see the farm itself. One particular reporter asked for a hammock to go to sleep because he loved the sound that the turbines make. This shows that those kinds of fears were hard to overcome at first. By working with the community and explaining the benefits we overcame this challenge, and were able to build the wind turbines. Quelling the community’s fears and uncertainties was the biggest challenge that we faced.
EGE Haina is planning to make a large investment in two plants in Quisqueya, including the Pueblo Viejo mine. How significant is this investment to the company?
This is the most important electricity project in the recent history of the Dominican Republic. For us it is a tremendous source of pride that Barrick Gold has chosen EGE Haina as the partner to operate its power plants. EGE Haina will be operating its 215-MW power plant. This arrangement will also allow us to operate another power plant that it bought in Monte Rio as well serve as the operator for the transmission line and the substations—everything on the electric side outside of the mine. For EGE Haina this is an acknowledgement of our strategy for many years of training our employees to do things right. After visiting our plants, Barrick Gold indicated that it wanted us to be its partner on the electrical side. Once it committed the investment for the mine, we decided to build a duplicate power plant. We invested $300 million to build a plant right next to it that is identical, but is to be dedicated to supplying power to the electrical grid. In the last 10 years we have been growing, and we have not had significant investments in the electrical sector, only minor ones. Cocos I, Cocos II, and Quisqueya II are the first big investments in the electrical sector. Quisqueya I is power that is not going to be drawn from the system, so in some ways it adds to the available power because it is not going to be taken out. It will be supplied by Barrick Gold, and we are very proud to be a part of those investments.
What were the main advantages that EGE Haina offered to Barrick Gold?
We have 12 years of operating experience in the Dominican Republic. The company has very well-trained technicians that make very efficient use of the engines. We have demonstrated that we can maintain and operate a power plant to world-class standards. As I always say, I invite anyone to come and see our power plants, and I could put our power plants up against any in the world—we are a world-class operator.
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© The Business Year - October 2012