GasAtacama to Invest US$25mn in Pipeline Expansion in Chile

Chilean gas transporter and power generator GasAtacama plans to invest US$25mn in the first stage of a project to expand the transport capacity of its gas pipeline in northern Chile, GasAtacama CEO Rudolf Araneda told reporters Wednesday.

The increased gas supply will be for a petrochemicals project being developed in Region II, Araneda said. He declined to specify which project, although according to a previous report, GasAtacama is negotiating supplies to explosives company Enaex for a US$120mn-130mn ammonia project at Mejillones in Region II. Financing is assured, but intense tariff negotiations between Argentina's government and gas producers have delayed the permits process, Araneda said. However, Araneda is confident that permits will be issued and that the first stage of the expansion will go ahead this year.

The project is in two stages, he said, without saying how much total investment in the project would be. In terms of its power business, GasAtacama plans to invest in new transmission lines to supply power to new mining customers in 2004, Araneda said.

GasAtacama installed a fourth turbine at its thermoelectric plant in 2003, adding 185MW of capacity. However, the company is still waiting for the economy ministry to issue the turbine's operating permit, Araneda said. The company aims to increase its market share of energy sales contracts in the northern grid (SING) to 25-30% in 2004, up from 24% in 2003 and 18% in 2002, Araneda said.

The company plans to fund its new gas and electricity projects with the US$78mn it obtained from the sale of its transmission assets in 2003, and US$75mn in financing from the World Bank's International Finance Corporation (IFC) and other banks. The IFC approved a US$125mn loan in November 2003 and the IFC will lead a US$150mn syndicated loan that GasAtacama plans to sign by March, Araneda said. GasAtacama will use about US$200mn of the financing to pay half of its US$400mn debt with shareholders Endesa Chile (NYSE: EOC) and US company CMS Energy (NYSE: CMS), and the remainder will be invested in new projects, Araneda said.

GasAtacama's board approved in late 2003 the company's new structure, which created a holding company to control the company's generation, gas pipeline, distribution and financing assets. The changes are designed to make the company's operations more efficient and open the possibility of different types of financing in about two years time when new long-term power contracts start up, Araneda said.

Araneda expects the new contracts to increase the company's EBITDA to about US$90mn by 2006 from US$55mn in 2003, allowing the company to take on more debt. The board will study two main financing options: issuing bonds or increasing capital by issuing new shares, Araneda said. GasAtacama increased its net income 900% to US$18mn in 2003 from 2002. Total sales increased 25% to US$180mn, the company said in a statement.

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