Engie Ditches Dirty Coal as Latin America Turns to Clean Power

(Bloomberg) -- As Latin America hones its focus on clean energy, international energy giants are leading the charge to get out of dirty fuels.

French behemoth Engie SA has announced it's closing coal-fired power plants in Chile at the same time AES Corp. of the U.S. and Enel SpA of Italy have pledged to stop building them. The moves constitute the less-sexy side of the conversion to clean energy in the region, where investment grew more than 25 times faster than the global rate in 2017.

“There is a clear market shift in Latin America, and it is getting more explicit in the companies' strategies,” said James Ellis, Bloomberg New Energy Finance manager for Latin America. “There is a momentum being built for renewables in the region and companies don't want be left behind.”

Take Engie, where Latin America has become key to its global strategy of abandoning dirty power production and boosting investments in renewables and natural gas. The region is poised to receive a third of Engie's investment dollars in 2018, second only to its home market in France.

“We have a clear plan to transform our energy generation portfolio in Latin America,” said Philip De Cnudde, Engie's chief executive officer for Latin America. “We are shifting completely to renewables and using what we have in natural gas as a backup for the new technologies.”

Transformations

Engie plans to replace the Chilean coal plants' capacity with renewable energy, with more details to be announced in coming weeks. Chile, which generates about 40 percent of its electricity from coal, is pushing power companies to phase out the plants as the country seeks to curb greenhouse-gas production.

The choreographed move away from coal stands in sharp contrast to the U.S., which generates about 30 percent of its electricity from coal and where beleaguered owners of old-school nuclear and coal plants that once supplied the majority of the nation's electricity have appealed to the government to help keep their plants open.

As it exits Latin American coal, Courbevoie, France-based Engie is also buying natural gas and renewable assets in Brazil, building new plants in Mexico and Brazil and bidding in clean-power auctions in Peru and Mexico. Competitor AES is also trying to diversify in Latin America, with its Brazilian unit targeting 50 percent of its earnings from renewable sources by 2020. Engie and AES, along with Enel and Colbun SA, have agreed not to build new coal plants in Chile without carbon-capture and storage systems to limit emissions.

“In Chile, coal is a very important source of energy,” Cnudde said. “We are working together with other companies on how we can decarbonize our operations, without putting the system in danger.”

Brazil

In Brazil, where Engie is the largest private utility, the company is in exclusive talks with ContourGlobal Plc for the sale of two coal-fired power plants in Brazil totaling 700 megawatts, the last non-clean ones it holds in the country, with the bid due soon, according to Mauricio Bahr, CEO of Engie's Brazil business.

Engie was recently one of the big winners at a power-line auction and agreed in November to buy the 605-megawatt Umburanas wind complex. The company is also considering whether to bid this month for a 2,800-mile (4,500-kilometer) natural gas pipeline network that spans 10 Brazilian states, seen as state-controlled Petroleo Brasileiro SA's largest asset sale to date.

“There is room for more M&As and we'll participate in future auctions for new projects,” Bahr said in an interview.

To contact the reporter on this story: Vanessa Dezem in Sao Paulo at vdezem@bloomberg.net.

To contact the editors responsible for this story: Lynn Doan at ldoan6@bloomberg.net, Margot Habiby, Will Wade

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