MercoPress. South Atlantic News Agency

Paraguay/Uruguay sale of power remains blocked by Argentina

Paraguay Deputy Minister for Mines and Energy Mercedes Canese trusts a deal will finally be reached

The sale of power from landlocked Paraguay to Uruguay remains in suspense given a “difference” in the toll price for the use of the Argentine grid to deliver the power.

Following a technical meeting with Argentina in which no agreement was reached on the price, the government of President Cristina Fernandez promised a definitive reply before next August 15.

“In case we don’t receive a satisfactory reply, we are going to take the discussion to Foreign Affairs level since this is the fifth technical meeting we’ve had”, said Paraguayan Deputy Minister for Mines and Energy Mercedes Canese.

Energy rich Paraguay and Uruguay have a pre-accord for the sale of surplus power but to reach Uruguay the use of Argentina’s grid is vital, but the toll price remains so far an insurmountable barrier.

However Canese remains optimistic about reaching an understanding.

“Let’s wait and see what the reply is; we trust the Argentines will keep their word: there’s a personal commitment from President Cristina Fernandez and we trust she will deliver”, added Ms Canese.

If the agreement is finally closed, Uruguay’s government electricity monopoly company, UTE, will be entitled to import up to 200MW/hour, but the profitability of the operation rests on the toll price Argentina plans to charge.

Under the original terms of the negotiation Paraguay would sell power for a price slightly above 100 dollars the MW/hour UTE thermal production costs are almost double in the range of 200 dollars.

A few weeks ago Canese announced that the negotiation with Argentina “took more time than expected” because it had become a political decision at the highest level between the three countries involved in the operation. However, ‘technical differences’ between Argentina and Paraguay have delayed the deal for over five months.

One of the first objections from Argentina was that the power effectively came from the Acaray hydroelectric dam and not from Yaciretá, shared by Argentina and Paraguay, and which under contract any surplus power can only be sold among the partners.

Since Argentina is energy short and Paraguay counts with a huge surplus most of Yaciretá power is absorbed by Argentina at below spot market prices, but as determined in the original contract.

Paraguay has to suffer a similar situation with the world’s largest operational dam of Itaipú shared with Brazil, which takes 90% of total production and pays the small partner a minimum at current world prices but in accordance with contract clauses from the seventies. Both situations are motive of recurrent claims from Paraguay to Mercosur senior members.