Codelco is looking to sell its 39.3MW Coya and 37MW Pangal hydro plants, located on Chile’s Pangal and Cachapoal rivers near Rancagua, for around US$75.6M in a bid to divest its non-core assets. A final decision on the sale is expected to be made in April 2004, according to PHY.

Even after the buyer is named, Codelco will maintain links with the hydro plants by buying all of the electricity produced under an initial four year power purchase agreement. The electricity will be used to power Codelco’s El Teniente copper mine, with surplus power sold on to the national grid.

PHY has a number of options for financing the acquisition including non-recourse bank debt, equity and the establishment of a joint venture.

While PHY awaits the decision, it is already optimistic about its prospects. ‘The equity internal rate of return for the acquisition exceeds [PHY’s] cost of capital for overseas investments,’ said the company. ‘PHY has already received submissions from a number of banks regarding the non-recourse debt financing,’ it added.

For an additional fee of US$1M payable in April 2004, PHY will also be able to buy water rights to the upper Cachapoal river, which will give it exclusive options over future opportunities.

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