Enel’s exit puts China in front of 70% of the market

With the confirmation of the sale for US$2.9 billion of Enel’s operations in Peru to the Chinese company Southern Power Grid International (CSGI), the capital of the Asian giant will take over 70% of the electricity distribution market in our country . The transaction will still have to go through Indecopi. Through the electricity concessions law, which regulates market concentrations, the same shareholder was prohibited from having a stake in the entire electrical chain, divided into three large sectors: generation, transmission and distribution.

Enel’s decision is due to its 2023-2025 strategy, in which it will invest some 37,000 million euros, of which 60% will be for an integrated commercial strategy and 40% for networks. It is also leaving Argentina and selling lines in Brazil. Rafael Laca, an energy specialist at Enerkory, clarifies that the fluidity of the supply should not vary, because there are standards on service quality and network expansion. However, he views a purchase with caution that could mean a slowdown in some investments, in addition to the handling of information that only companies in the sector have.

“The Chinese state participates in all its private or public companies. After entering Luz del Sur, now it has arrived at Enel and the shareholding of the Asian giant is already in the entire distribution of Lima; that is to say, more than 70% of the energy consumption in Peru”, refers the expert. In terms of infrastructure, it is also the largest distributor in the country: 20% more networks than the second, Luz del Sur.

The passage of Enel in Peru

The Enel Group companies in Peru have an effective capacity of 2,298 MW, of which 1,225 MW correspond to thermal power plants, 795 to hydroelectric power plants, and the rest to wind and solar power plants. Likewise, it has a portfolio of three generation projects (Curibamba, Clemesí and Wayra), with a joint installed capacity of 419 MW. However, Laca warns that the CSGI purchase could be influential. “When Chinese investments enter the sector, decision-making is always slower than with American or European firms. It is due to a cultural-business issue, which could delay some key investments for the market”, he anticipates.

The Italian Enel redirects its investments

As of June 2022, Enel had a client portfolio of more than 1.16 million in Peru, of which 94% are residential users, the rest are commercial and from the industrial sector. Enel is also engaged in transmission activity. It operates the SEIN secondary system networks, also called subtransmission. The group would seek to focus on six countries where renewable energy has a higher value: Italy, Spain, Chile, Colombia, Brazil and the US.

Data

Supply. Enel’s effective power represents 17.7% of that of the National Interconnected Electric System (SEIN).