Newly released market study: Peru Power Report Q3 2016

Strong growth in electricity consumption , government tenders for power generation and transmissions projects, and robust investor interest in the market continue to support our positive outlook for the Peruvian power sector . The completion of the Southern Peruvian Pipeline - which is expected to provide feedstock to new gas-fired power plants - will be delayed as a result of the pull-out of its leading constructor Odebrecht, confirming our view that d elays in project tendering and implementatio n pose the biggest risk to investing in th e Peruvian power sector .Latest Updates And Structural TrendsUnderpinning our positive outlook for the Peruvian power sector, we believe the next Peruvian government will prioritise investment in infrastructure, regardless of which candidate emerges as victorious in the second-round vote in June 2016. BMI's Country Risk team highlight that Keiko Fujimori and Pedro Pablo Kuczynski maintain pro-investment economic agendas that pledge a focus on infrastructure spending, and both are set to have strong Congressional representation.We expect the completion of the Southern Peruvian Pipeline (Gasoducto Sur Peruano, GSP) to be delayed as a result of the problems facing Brazilian constructor Odebrecht, the owner of a 55% stake in the project. The consortium developing the GSP has struggled to secure financing amid the Lava Jato corruption scandal, and Odebrecht's decision to exit the project in early April 2016 means time will need to be spent to find a replacement. As the GSP is expected to supply feedstock to two thermal power plants under construction in Ilo and Mollendo, the delay has resulted in a revision to our forecast for natural gas-fired power generation in Peru.In April 2016 the Peruvian government introduced a bill to parliament outlining the rules according to which Peru will be able to export electricity to other neighbouring countries beyond Ecuador, with which power interchange already exists. A vast pipeline of new thermal and hydropower projects, coupled with growing regional policy emphasis on electricity interconnections between Andean countries, will support Peru's plan to increase power exports to its neighbours over the coming years. Provided that political agreement is found, Chile is likely to be Peru's first export market as the electricity interconnection project between the two countries has already been defined.Despite the success of the latest renewable energy tender in February 2016, we maintain non-hydropower renewable energy will play only a minor role in the Peruvian electricity mix over the coming decade, due to much greater growth in hydropower and natural gas-fired power generation. Peru's National Energy Plan does not include provisions for growth in non-hydro renewables beyond its target of having 5% of total electricity produced by non-hydro resources by 2018, which will be reached via the auction. As such - barring the launch of a new renewable energy tender in the future - we e

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