Opportunities Related to the New LNG Terminal in Uruguay

Opportunities Related to the New LNG Terminal in Uruguay

The development of the LNG regasification terminal GNL del Plata will allow Uruguay to generate gas-fired power, increasing energy efficiency and lowering power costs for local businesses.

LNG regasification terminal GNL del Plata

One of the most important infrastructure projects in Uruguay is the LNG regasification terminal GNL del Plata. The terminal will have a breakwater, a marine gas pipeline, and a floating storage and regasification unit. The project is located in Punta de Sayago, Montevideo and should be fully-operational in early 2019.

The terminal will be developed with a 6km-long access channel that will be connected to the Port of Montevideo. The project has a total cost of $1.3 billion to $1.5 billion with a lifespan of 15 years. The ability to move LNG volumes across the region will allow for more efficient movement of retail power. Gas-fired power generation will also lower costs for industry participants longer-term via more competitive power purchase agreements (PPA).

LNG in Uruguay Diversifies Energy Risks

The development of more LNG in Uruguay can also act as a hedge for a potential slowdown in the country’s renewable sector. Competition from Argentina and Chile for investments in renewables will make the renewable energy projects in Uruguay relatively less attractive.

The new LNG terminal will support spending and economic activity in the domestic sector over the next several years, offsetting slower growth in renewables.

Investment opportunities related to GNL del Plata include financing of LNG supply and storage contracts, trade finance for refined products moving through the port, and we expect new financing needs for shipowners and vessel operators to increase over the next 12 to 18 months.

Latam Energy Advisors can help investors evaluate the underlying contracts and collateral, assess the creditworthiness and event risk of borrowers, and set up tax-efficient financing structures to facilitate the transaction.

We Maintain a Stable Outlook for the Power Sector in Uruguay

We view Uruguay’s power sector as a stable place for business investment, but there is little on the horizon to propel domestic power demand. The lack of robust domestic power demand will slow the need for institutional investment. However, if Argentina and Brazil can sustain a successful rebound (not our base case for Brazil, but we are positive on Argentina’s economic prospects), this could drive growth in Uruguay since they are a net power exporter.

Uruguay’s power market is regulated and The National Administration of Power Plants and Electric Transmission (UTE) has a monopoly over power distribution. There are several independent power producers (IPP) in the market, which typically enter into long-term PPAs to supply energy to the grid. Most of the private sector activity for IPPs have been related to wind power, with companies like Enel Green Power, Vestas, and Gamesa all active in Uruguay.

Please contact Latam Energy Advisors for the full report on the Power Sector in Uruguay. Latam Energy Advisors can also help U.S. suppliers access export opportunities related to infrastructure projects and the energy sector in Latin America.