AES Gener Confirms Value of Long-Term Contracts with $720 Million Payment, Enabling Further Decarbonization
Payment to be received in 2020
The subsidiary of AES Gener S.A. (“AES Gener”, or “the Company”) Empresa Eléctrica Angamos SpA (“Angamos”) has reached an agreement with BHP subsidiaries Minera Escondida Limitada and Minera Spence SpA, for the early termination of their tolling power purchase agreements (“The PPAs”) with the 558MW coal-fired plant in Chile.
Per this agreement, the PPAs will cease in August 2021. In 2020, Angamos will receive a US$ 720 million payment, primarily reflecting the present value of the fixed charges through 2029, as stipulated in the PPAs. The agreement also resolves all pending legal disputes.
Through this agreement, the Company is accelerating the monetization of the future value of these contracts at a very low discount rate and fully delinking Angamos’ PPAs from the coal asset.
Ricardo Falú, CEO of AES Gener, stated, “This agreement is a clear demonstration of the value and robust nature of AES Gener’s Tolling Agreements with the largest mining companies in Chile. It also confirms that the value of AES Gener lies in its long-term contracts and customer relationships, which are the competitive advantages to accelerate decarbonization through Greentegra solutions.”
As of 2022, having fully delinked all PPAs from the physical plant, Angamos will be fully merchant. Once the system no longer requires the coal-fired plant to ensure the reliability of the grid, the Company will proceed to shut it down, having fully recovered its expected return and investment.
“When we launched our new strategy in 2018, we took on the challenge to accelerate Chile´s decarbonization process by incorporating renewable energy and batteries into the grid while shutting down coal-fired plants as soon as the reliability of the system allows. That is our commitment”, added Falú.
In line with the Company’s Greentegra objectives to reduce the carbon intensity of its portfolio and strengthen its investment-grade ratings, the full net proceeds of the agreement will be used to prepay debt and fund US$ 200 million of wind, solar and battery growth.
Ricardo Roizen, CFO of AES Gener, indicated “The attractive returns on renewables investments we are making ensure sustainable earnings and dividends for the years to come, while the reduction in debt levels strengthens the capital structure and the investment grade of AES Gener.»
AES Gener is advancing in its transformation to accelerate the decarbonization and diversification of the energy markets where it operates. The Company has already secured 8.1 TWh/y in Greentegra contracts. It is adding 2.2 GW of contracted wind, solar, hydro, and battery capacity into its portfolio by 2024, reducing its carbon intensity by 27%. This transformation includes sizeable investments, generating thousands of jobs, and driving social and local development, thus playing a critical role in the sustainable economic recovery.
This agreement is subject to certain conditions to be satisfied by August 31, 2020, and Angamos receiving the net sum of US$ 720 million this year. For further details please refer to the Material Fact available here.
The Company will host a virtual Q&A session on Tuesday, August 11, at 8:30 AM. To connect to the call please register here.
About AES Gener
AES Gener generates and sells electricity in Chile, Colombia, and Argentina with the mission of improving lives by accelerating a safer and greener energy future. The Company operates a total installed capacity of 5,299MW in the region along with an extensive portfolio of renewable energy projects under development. The Company is the largest generator in Chile in 2020, with a diversified portfolio including hydro, wind, solar, energy storage, biomass, gas, and coal-fired power plants.
AES Gener owns and operates 3,615MW in Chile, comprised of 3,068MW of thermoelectric, 271MW of hydroelectric, 110MW of wind, 92MW of solar photovoltaic and 13MW of biomass capacity, in addition to 62MW of battery energy storage systems, seawater desalination plants, transmission lines, and gas pipelines. AES Gener also owns hydroelectric and solar plants in Colombia with a total capacity of 1,041 MW and a combined-cycle natural gas plant in Argentina with an installed capacity of 643 MW.
AES Gener is 66.7% owned by The AES Corporation.