Transelec, Chile
– Backbone transmission system of Chile
Interest: 18%
Description
Transelec is the largest electricity transmission system in Chile, with approximately 8,200 km of transmission lines that serve 98% of the population of the country. Transelec’s system includes 100% of Chile’s 500kV transmission lines, the highest voltage lines in the country.
Regulatory Environment
- Regulated transmission assets earn a 10% real return on replacement cost, which is stipulated in Chilean law.
- Regulated revenues are determined every four years with annual indexation by a multi-component inflation factor.
Strong Stable Cash Flows
- Low maintenance capital expenditures combined with the replacement cost based regulatory framework produces very strong cash flows with no material volume risk.
Customer Base
- Approximately 60% of revenues are derived from long-term contracts with power generators, with contracts similar to the regulatory framework.
- Largest contract expires in 2016.
- Upon expiration, the majority of contracts will convert to the regulatory framework.
Growth Opportunities
- Chile has electricity generation that is many miles away from customers. Upgrades and expansions of the electricity system will be required to connect economic generation to load centers to satisfy increased electricity demand resulting from economic growth.