Report Published: "Argentina Power Report Q3 2013"

Argentina is heading towards an energy crisis. With domestic electricity generating capacity falling short of demand, the country has no choice but to turn towards expensive energy imports, and continued delays to new capacity - such as the nuclear power station Atucha II - mean that an electricity generating deficit will continue to characterise the market. Making matters worse, the government continues to subsidise electricity bills, increasing costs further, while Argentina's economy is also suffering, and investors' confidence is low. There are projects to improve electricity generation, transmission and distribution capabilities, but it will take time for these to be completed - and delays are likely - meaning that the country is a long way from achieving energy security and independence.

Full Report Details at
- http://www.fastmr.com/prod/617000_argentina_power_report_q3_2013.aspx?afid=301

Argentina's power generation increased by an estimated 4.2% during 2012, underpinned by an estimated 4.0% rise in consumption. However, we expect electricity generation growth to slow to around 2.6% in 2013 as power demand wanes, and early figures for electricity consumption in 2013 - showing a decline - reinforce our view.

In terms of generation, thermal-based sources, primarily natural gas, remain the cornerstones of the electricity mix. Roughly 65% of electricity is currently generated from oil-, gas- or coal-fired power plants, with hydropower providing the next largest contribution, of 28%. Going forward, we expect this trend to continue, despite the government's efforts to diversify the electricity mix away from unreliable hydropower and costly thermal imports.

Key developments for Argentina's power sector this quarter include:

* In international developments, Argentina and Bolivia's governments agreed in May 2013 to increase cooperation in several sectors, including nuclear energy and hydrocarbons. In May 2013, Argentina and Brazil signed a contract to construct an US$11mn nuclear reactor in Brazil, representing the continuation of an agreement signed between both governments in 2008. There are also plans to build a twin reactor in Argentina.
* EDELAP announced plans to invest ARS1.5mn in a new substation and transmission line in Berisso. In May 2013, Transener also announced it had completed the construction of a transmission line and transformer to improve the supply of electricity in Ezeiza, in a US$58mn project.
* After several delays, the start-up date of the Atucha II nuclear power plant is scheduled for mid-2013. The president of Argentina's nuclear body, NASA, confirmed in March 2013 that operations will begin at the power station in mid-2013, with the power station operating at full capacity by Q413.

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