2. Market Integration The Southern Cone of South America Experiences Juan Luchilo – CAMMESA APEx 2003 Conference Cartagena, Colombia

3. Regional Market - Basic Data Mercosur Market, 5 countries: (Argentina, Brazil, Chile, Paraguay, Uruguay) Population:  about 240 M Installed Capacity:  120 TW Annual Energy Consumption:  450 TWh

4. Regional Market - Basic Data Different resources in each country (Brazil, Uruguay, Paraguay mostly hydro; Argentina, Chile, hydrothermal) and level of deregulation Long distances between main loads and from resources to load; Barriers between countries  natural (mountains, rivers)  political => openness to integrate markets  technical and economical viability=> distances, electrical issues Opportunities => complementarity of demand and hydro availability, gas and electricity integration

5. Energy Conssumption

6. Deregulation of the Electric Sector BRAZIL 1998 ARGENTINA 1992 PARAGUAY ? CHILE 1982 URUGUAY 200?

7. Links - Evolution Before 1997 => Integration related with binational hydro power plants; agreement between countries Argentina – Uruguay - Salto Grande (1890 MW) Brazil – Paraguay – Itaipú (12600 MW) Argentina – Paraguay - Yacyreta (1800 MW)

8. Links - Evolution After 1997=> Integration related with market opportunities=>  competitive market, gas availability and new capacity in Argentina  generation needs at northern Chile  complementarity with Brazil and Uruguay (firm capacity for dry hydro years) Argentina – Chile => new 345 kV link from Salta to Northern Chile; thermal generation built specifically for that purpose; isolated Argentina - Brazil (2000 MW); 2 back to back DC converters (50/60 HZ) built – firm capacity contracts Argentina – Uruguay – firm capacity contracts (400 MW) using existing link

9. Electricity or/and Gas? As well as electricity, gas has also become a product exchange in the south cone: Brazil imports from Argentina and Bolivia, and transform part locally in electricity Chile imports from Argentina, to fuel its new generation plants Uruguay is on the same way soon There’s a competition wether to transport gas and transform it afterwards in electricity or to produce electricity and then transport it through wires; economic viability is related with volume requirement and scale

10. High Loads Hydro Resources Gas Resources Energy Links – Gas & Electricity Electroducto Argentina Chile Gasoducto Atacama y Norandino Gasoducto Gasandes 7-8 Gasoducto del Pacífico 1.5-9 Gasoducto Bolivia-Brasil 30 Electricity link Argentina-Brazil Electricity link Argentina-Uruguay Electricity link Argentina-Paraguay

11.  Resources Optimizatión  Share reserves (seasonal, hourly)  Increase reliability, quality Impacts (Argentina – Brazil link) Some Benefits It requires adequate technical coordination between the interconnected systems

12. Results -Argentina – Brazil link

13.  Increase volatility in Argentine spot price (2000 MW firm capacity delivered if Brazil needs it; Argentina is a 10000 MW system) Impacts

14.  Macroeconomic issues (like devaluation) affect parties => requires dynamic adaptation to mantain in the short term operativity, and long term commercial viability  Lack of regulatory compatibility  Technical and economical complexity to interconnect countries Concerns

15. Quality, Technology & Transparency For an Electrical Market without frontiers ¡Thanks for your attention! Colombia, October 2003 Doubts => jluchilo@cammesa.com.ar More info => www.cammesa.com.arjluchilo@cammesa.com.arwww.cammesa.com.ar