Cerro Pabellón

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Project Number: 
CH-L1102
Expected Consideration Date by the Board: 
12/13/2016
Date Posted: 
06/03/2016
Company: 
Enel Green Power Chile Ltda.
Sponsoring Entity: 
Enel S.p.A.
Financing Requested: 
USD 30,000,000.00
Sector: 
Energy
Environmental and Social Category: 
B
Location: 
Chile
Country: 
Scope Objective: 

The Cerro Pabellón geothermal power project is being developed at the Apacheta geothermal concession, 1,300 km north of Santiago, at an altitude of 4,500 masl. Enel Green Power Chile Ltda and its parent company Enel S.p.A. (together the “Sponsors”) are seeking financing to invest in the building of an up to 48 MW power plant and 80 kilometer (km) transmission line to interconnect to Chile’s Sistema Interconectado del Norte Grande (SING) at a total cost of US$320 million (“the Project” or “Phase 1”). Commercial operation of the power plant is expected to occur in the first half of 2017.

Cerro Pabellón is the most advanced geothermal project in Chile, with four deep exploratory wells already drilled between 2009 and 2010. The next stage of development involves work-overs of two existing wells as well as the drilling of five additional production wells and two reinjection wells (the “Drilling Program”). The Sponsors have requested financing from the Inter-American Investment Corporation (the “IIC”) in its capacity as administrator of the Clean Technology Fund (the “CTF”) in the form of a short-to-medium term loan during the Drilling Program (the “CTF Loan”). If the Drilling Program is not successful, the CTF Loan would be converted partially or fully to a grant. If the Drilling Program is successful, the CTF Loan must be replaced by long-term debt or repaid by the Sponsors.

Environmental Review: 

The Project has been classified as a preliminary Category B operation according to the IIC’s Environmental and Social Sustainability Policy due to the risk factors present. In particular this includes the presence of sensitive habitats in the region, particularly in the area of the 80 km transmission line, evidence of land claims from Indigenous peoples in the same area, cultural sites of importance and, health and safety issues and risks associated with working at very high altitude and isolated area.

The EIA for both the geothermal plant and the transmission line have been completed and the Project received its license (Resolución de Calificación Ambiental-RCA) from Chile’s Servicio de Evaluación Ambiental (SEA) in April 2012. The Project takes place within the Area de Desarrollo Indígena (ADI) of Alto Loa. The legal implication of this status will be verified during the due diligence. The Sponsors developed a Community Participation Plan and there is evidence provided in the EIA that communities that may be affected by the Project and its associated facilities have been consulted. During 2015, a second consultation process was carried out with the participation of representatives of Chile’s Ministry of Energy to socialize the Project and its impacts. This second process resulted in bi-lateral agreements with each community that are being executed. Efforts invested in collecting physical, biological and socio-economic baseline have been limited and the due diligence will determine the extent of additional studies required.

IIC intends to hire an independent environmental and social consultant for due diligence to evaluate the risks present, confirm the project categorization, assess management plans to mitigate these risks, and define a project action plan. During due diligence the IIC and the consultant will visit the site and further assess the Project’s Environmental, Health and Safety Management System, including plans and procedures, review the Drilling Program and storage facilities for the drilling mud, verify the extent of public consultation, evaluate indigenous presence and status of land claims, assess baseline information pertaining to key environmental and social concerns, and evaluate the social and labor issues related to the worker camp. The Sponsors will be required to ensure the Project meets the requirements of the IIC Sustainability Policy and address any gaps in the form of an action plan. In addition, an environmental and social review summary (ESRS) will be prepared and posted on the IIC’s website once the due-diligence visit is conducted.

Executive Summaries of the EIAs for the power plant and the transmission line can be found on IIC’s website. These documents, in addition to the detailed EIA chapters and other relevant environmental and social documentation, are further available publicly from SEA: http://seia.sea.gob.cl/busqueda/buscarProyectoAction.php?nombre=Cerro%20...