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Rurelec's Guaracachi to build further power station in La Paz, Bolivia

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Rurelec PLC (AIM: RUR) said its 50.001 percent owned subsidiary Empresa Guaracachi SA, has at the suggestion of the Bolivian government applied to the Electricity Control Authority (the AE) to install a new gas fired power plant with a nominal capacity of 128 MegaWatts on a site at Huaricana in the Department of La Paz which was acquired two years ago by Guaracachi for such a project.

The developer, owner and operator of power generation capacity in Latin America, said this will be Rurelec's first generation capacity serving Bolivia's seat of government. The decision to go ahead with the plant comes amidst concerns that La Paz and the adjacent City of El Alto on the Bolivian Altiplano will suffer from power constraints in early 2011 as a result of the high rate of demand growth for power in the west of the country.  

In the last four years, under Rurelec's ownership, Guaracachi has installed some 185 MW of new capacity, and the company believes this has contributed to Bolivia being the only country in the Southern Cone of Latin America not to have suffered from power cuts over this period. It cited a recent IMF report as stating that Bolivia currently enjoys the highest economic growth of any country in the whole of North and South America.  

To date, all of Guaracachi's new generation capacity has been installed to the east and south of the Bolivian capital. Huaricana represents an important switch to the west of the country.

The site is roughly 30 kilometres from the suburbs of La Paz at a height of 2,200 metres above sea level and the plant, which will consist of one Siemens Westinghouse 701DU gas turbine, will be used as a seasonal peaking plant covering times when hydroelectric generation from the Andes is insufficient for the needs of Bolivia's capital city as well as occasions when line balancing requires the plant to run in forced generation mode.

Guaracachi currently owns and operates around 445 MW of gas fired capacity but this figure will rise to 545 MW in the first quarter of 2010 when the new combined cycle plant in Santa Cruz and the new gas engine plant in San Matias are brought on line. Guaracachi already has a special exemption from the Government to own and operate more than 35 percent of the installed capacity of the Bolivian national grid, a figure which will increase to well over 42 per cent in 2010.  

The addition of yet another 128 MW would breach the 35 percent market share limit further still. Guaracachi is therefore applying for the necessary permits, gas pipeline and transmission grid connections as plant operator and as the sponsor of a consortium of investors led by Independent Power Corporation PLC. In this way Guaracachi will not breach Bolivia's 1995 Electricity Law which governs market share on the grid. IPC is a company controlled by Peter Earl, managing director of Rurelec, and owns 9.31 percent of Rurelec. 

The Government of Bolivia is expected to pass new legislation early next year which will allow Guaracachi to own in its own name more than a maximum of 545 MW.

In the meantime Guaracachi is co-ordinating the project for IPC and other investors to ensure that the new capacity is commissioned and operational in La Paz by the first quarter of 2011.

IPC has exchanged contracts with the owner of the Siemens Westinghouse 701DU gas turbine and has provided the deposit monies needed to reserve the turbine while the necessary Bolivian consents are granted. The turbine is one of four currently owned by IPSA Group PLC (AIM: IPSA) which were acquired for the stalled Coega Fast Track Power Project in Port Elizabeth, South Africa.  

Finance for the Huaricana project has been offered by local Bolivian banks and contractors. Corporacion Andina de Fomento (CAF), the Andean Development Corporation, has expressed an interest in participating in the financing of the project. Financial close and the commencement of construction are both expected at the end of the first quarter of 2010.

Quick facts: Rurelec PLC

Price: 0.8575 GBX

AIM:RUR
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Market Cap: £4.81 m
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