DOMINICAN REPUBLIC - Energy & Mining
Executive Vice-President, CDEEE
Prior to becoming Executive Vice-President of the Dominican Corporation of State-owned Electricity Enterprises (CDEEE), Rubén Jiménez Bichara worked as a General Accountant for Industrias Guayo CXA. He was also General Manager at Importadora Ventura and La Telefónica INC before assuming the role of General Administrator at EDESUR. Shortly before joining CDEEE, he served as General Manager at the Industrial Development Corporation (CFI) at the Center of Industrial Development and Competitiveness.
To reduce energy losses is one of our fundamental objectives for the recovery of the sector. A decade ago, the level of losses was around 46%-48%. In 10 years we have reduced that to 38%-40%. The slow progress can be justified by the inconsistency of the investment. There are points at which progress could be made, but if the investment is stopped then the problem comes back. In the last two or three years, with the help of international organizations like the World Bank and the IDB, we have undertaken major projects that have resulted in significant loss reductions. The result of these projects may be seen in 1Q2013, and the impact on losses will be considerable.
Energy losses mean that for every 100 kW you put on network, 60 kW will reach its destination and 40 kW is lost; you do not know who to charge for this. To remove vulnerabilities in the network, we need to redesign them in a way that people cannot connect illegally. Therefore, the investment needed to improve the network entails an expense. If you spend a year investing and then three years without investing, then you make no progress. The inconsistency of investment in the network is what has allowed the losses to remain high. We must change the transformers and invest in meters, both in smart meters and in prepayments. As we improve all that, we can reduce the losses.
The generation costs are quite high, and this is one of the main obstacles for the solution of the problem. Approximately 45%-50% of our plants use fossil fuel generation. The current oil price makes generation costs too high for us, so in the future our focus is primarily to change the facilities and direct them to gas and coal. We will try to move to the greatest extent away from energy derived from oil.
The contracts were designed in times when the price of fuel was very low, meaning the existing indexation formulas that have internal contracts are a distortion of the current price level. The formula allows for fuel indexing, and a marginalization of those who are on contracts. These are the weaknesses of the contracts and they should be adjusted.
We have a record number of generators, and we are in good financial health. However, it is the companies that experience high profits. The formulas were designed with oil prices of $17, and now it is $100, so the distortion is greatly exaggerated.
Right now, we are proposing an open tender for a 900 MW coal-fired plant, and a gas-fired plant of 600 MW. This is an investment that can easily reach $3 billion. We will gradually introduce a 600 MW coal-fired plant, representing an investment of $1 billion-$1.2 billion.
The idea is to make a project “turnkey,” meaning the government tenders the project and whoever wins will manage the funding, implementation, and additional facilities, such as constructing transmission lines, adapting the port, and installing coal storage facilities.
Right now, there are loans that are being used to rehabilitate the networks that were granted by the IDB and World Bank. The government has no perspective on borrowing for investment in the sector. However, there is the need to make an investment in generation before the end of 2012. That is an internal operation where the energy sector and local banks will work together in order to make a substantial investment before the end of the year.
At this time, the overdue debt with generators—more than 60 days—is around $540 million.
To the extent we are able to reduce the cost of electricity, we will do our best. While it is true that in our rate is higher than in some countries, it occupies a significant proportion of household budgets. The need to lower the cost of generation will also impact the control of user costs.
The contract extension has greatly limited the ability of the government to find a solution to the problem. The contracts expire in 2016, and our efforts are focused on creating an “energy park” with our own plants to be in good position to negotiate.
We have major hydroelectric projects under development, and we consider it an important factor in reducing costs, so we attach great importance to them. The current administration has made significant progress in the recovery of dams that were practically disabled. One of those units had gone eight years without operating, and these are the dams that will be rehabilitated. At this rate, the dams will provide an important contribution to our recovery.
We inherited a large domestic debt and a budget of $270 million. That assignment fell far short of the actual deficit in the sector. In 2013, there will be a bigger budget to cover the deficit, and that will help us to focus on solving the problem. The close of 2012 is going to be traditional; there will be nothing new. There are expectations of a substantial improvement in 2013, in compliance with the commitments we have with generators as well as with suppliers. We will be fully focused on activities solving the energy problem in the medium to long term.
Of course. There is the need for a comprehensive solution, and we are mainly looking to integrate all sectors into a common work plan, covering not only the contracts, but the expansion of power generation, improved management by the distributors, loss recovery, use of hydroelectric generation, contract review, and all such joint activities. By the end of the government’s term, each one of these things will have an impact and provide substantial improvement regarding the power issue.
At the moment, 300,000 customers are consuming 80% of the energy bill. The idea is to provide a smart meter to those customers. This Prisma project began in 2009 with EDE Este. Approximately 50% of customers are smart metered, and the idea is to get 100% using smart meters. This will be conducted as a public investment, with support from international organizations.
Right now, the country is experiencing steady growth, and energy demand is increasing as well. We need to extend the “energy park” to no less than 1,500 MW in the coming years. That is without counting the large number of self-generators, which are companies that produce their own energy. This is a more stable and cheaper platform, and can be a very attractive investment for any investor interested in the energy sector.
© The Business Year – December 2012
DOMINICAN REPUBLIC - Finance
Business Development Director, Latin America Region JMMB
DOMINICAN REPUBLIC - Health & Education
Director & President, Clinica Corazones Unidos
DOMINICAN REPUBLIC - Real Estate & Construction
Executive Coordinator, RD2044
By sponsoring our events you are able to best participate in the discussions that matter to you, as well as gain unique networking opportunities.