9 May, 2002 – Peru’s drive towards privitization suffered a setback following the decision by Duke Energy Corporation not to bid in next week’s auction for state-owned electricity companies Egasa and Egesur.

The US power company’s decision emerged in an interview by Duke Energy’s public affairs manager in Peru, Ernesto Garcia Calderon, with radio station RPP Wednesday. He said, “The main theme in our evaluation in the last months on whether to participate or not in the privatization of Egasa and Egesur has been on regulatory risk.” He said that foreign investors were dealing with a state agency, Osinerg, whose proceedures “totally lacked credibility”.

Garcia Calderon said the process of setting rates wasn’t based on technical criteria. He said rates should be set one or two years ahead of time, not four years, as it is almost impossible to predict when generating facilities will be built and go online.

The base price for the auction of regional electricity generating companies Generacion Electrica de Arequipa, or Egasa, and Generacion Electrica del Sur, or Egesur, was jointly set at $156m. The minimum price bidders must offer for Egasa is $139m, and for Egesur is $17m. Egasa’s energy output represents 5.7 per cent of Peru’s total electricity generation, while Egesur produces about 1 per cent.

The auction is scheduled for May 15 and bids must be for both companies.
Among other potential bidders for the companies are US companies AES Corp, PSEG Global Inc and NRG Group Inc as well as Tractebel SA from Belgium and Swedish power group Statkraft AS.

The Finance Minister Pedro Pablo Kuczynski said on local radio, “I am very sorry that Duke has decided not to participate in the bidding, and I hope that the problems that they have can be corrected.”

The privatization process has met with considerable public opposition alyhough Duke insisted that this was not the reason for its decision. Further industrial action is planned by regional groups, according to local media.

The Peruvian government hope to raise a minimum of $700m through privatizations this year.