Companies linked to Small Distributed Generation Projects (PMGD) in Chile have once again criticized the government regarding the potential impact of the proposed bill to expand electricity subsidies. Among other measures, the bill proposes that PMGDs finance electricity bill subsidies and help reduce tariffs for small and medium-sized enterprises (SMEs). Specifically, CVE Chile and oEnergy appeared before the Mining and Energy Committee of the Chamber of Deputies, where they openly criticized the initiative promoted by the Executive Branch and warned of serious risks, ranging from halts in investments in the sector to financial defaults for various companies. "The mere introduction of the bill has already led to the suspension of future disbursements; in other words, there is no more financing for new projects," they stated.
“We have USD 80,000,000 tied up (out of a total investment of USD 290,000,000 for parks already operational and under construction) because the disbursement will not be approved until there is clarity,” stated Erich Schnake , Director of Legal and Public Affairs at CVE Chile. “If the bill is approved, it would imply a review of the financial model and would entail a default, making it difficult for the financier to demand early repayment of the entire debt.”
This triggers a complex situation for companies, whether through the liquidation or renegotiation of financing contracts,” he added. It should be noted that the financing of PMGD subsidies would be provided through a temporary charge on energy withdrawals from the system, called the “FET Charge” (Tariff Stabilization Fund), for the years 2025 to 2027, amounting to $1.8 per kWh. This charge is financed by the retention equivalent to the compensation for stabilized prices paid in accordance with the transitional regime of Supreme Decree No. 88/2019. Meanwhile, support for SMEs would be provided by enabling the injection and withdrawal of energy at the same connection point, for sale to the public distribution service concessionaires operating in that area.
Therefore, distributors will be able to pass on this price to the pool of customers comprised of SMEs and rural water service operators that meet the objective targeting requirements. On the other hand, oEnergy's business development manager, Yuri Andrade , insisted that the announcement of the initiative has jeopardized the company due to financial pressure, and that the decrease in revenue will result in the company's failure to meet its commitments and contracts with creditors. "The bill is based on a cost estimate that differs from the actual cost, therefore it would have serious consequences for the sector, as it would affect the financing of critical infrastructure needed to advance decarbonization," he emphasized. In fact, this specialist revealed that, due to regulatory instability, they have already postponed transactions for 70 MW of fifteen PMGD projects between Iquique and Coquimbo that were scheduled to begin construction in 2025, in addition to another 300 MW of energy storage capacity in the Tarapacá region. "When the transitional Supreme Decree is violated, it condemns the country to having to pay more in financing from international banks for the energy transition and the pipeline that the country has to achieve decarbonization," Andrade stated.
