Besalco Energia Renovable SA

BESALCO ENERGIA RENOVABLE S.A. (BSER)

Showcasing Chile’s Renewable

ENERGY Potential www.besalcoenergia.cl

TO REDUCE DEPENDENCE ON

IMPORTED FOSSIL FUELS,

in March 2008 Chile’s President, Michelle Bachelet, signed into law a bill that required every new energy contract to include at least 5% renewable sources

Besalco Energia Renovable S.A. (BSER) is one of Chile’s pioneers in its shift from importing fossil fuels to producing its own sustainable, renewable energy. During the last three years the company has built two “run-of-river” plants with a total capacity of 31 megawatts (MW) of power.

Run-of-river plants rely on the movement of rivers or fast moving streams to produce power, including canals used for irrigation, rather than the construction of dams. They are generally decentralized, small-scale projects that are more sustainable than dams, and have a much lower impact on the environment and local communities.

In development of the two projects, Los Hierros and Los Hierros II, Besalco Energia Renovable blended economic, social, and environmental concerns to support the company, the community, and the country.

Seven years ago Chile was behind the rest of the world in renewable energy production. At that time, they had only 347 MW of installed renewables capacity, the largest share of which came from biomass (55%). Hydropower generated 39% of that 347 MW or just over 135 MW capacity for the entire country. Compare this with the United States’ Bonneville Dam, which alone generates 1,092 MW capacity.

By 2025, energy generators must be securing 10% of power through renewable sources or face heavy fines, including small hydropower projects of under 40 MW. To help with the transition Corfo, the government’s investment promotion agency, committed to finance more than 50 feasibility studies with a potential collective yield of over 300 MW and costing up to US$400 million. Corfo’s studies determined that Chile’s vast network of lakes and rivers in the central and southern regions made mini-hydropower projects a promising renewable energy source, with a minimum potential of 850 MW of power from more than 290 channels (small dams owned by agricultural channel management associations). Corfo now supports more than 120 such projects.

The change in water regulations, coupled with government financial support, led to an immediate increase in the number of mini-hydropower and run-of-river projects. By 2009, run-of-river hydro projects, such as those of Besalco Energia, were already generating 1377.3 MW of power capacity for the country.

Besalco Energía was created in 2007 as a division of the Besalco group - a 75 year old construction company known for completing some of Chile’s most challenging projects. In 2012, Besalco Energia Renovable was formalized as a company in itself, although still part of the Besalco family of companies. This move allowed it to operate independently, while retaining the advantages of having sister companies that specialized in different types of projects.

Besalco Energia’s two run-of-river power plants,

IN OTHER PARTS OF THE COUNTRY,

the company has seven more run-of-river projects in the works, with installed capacities of between 5 and 30 MW. In addition, Besalco is conducting an environmental assessment for its first wind power project.

Los Hierros and los Hierros II, have respective capacities of 25 and 6 MW of power. Total project investment came to nearly US$130 million, which included the transmission line and substation that connects the Melado-Ancoa complex to the grid.

The two plants utilize the hydropower of an old irrigation canal built in the 1900’s called “Canal Melado,” fed primarily by the Melado River - a tributary of the well-known Maule River. For nearly one hundred years, this canal has served

to irrigate thousands of fields during the summer.

When not needed for irrigation (primarily during winter) the project diverts these waters into its facilities to generate electricity. Overall the canal affects, directly or indirectly, the lives of more than 60,000 people.

Besides the Los Hierros and Los Hierros II projects in the basin of the Melado River, BSER plans other projects in the Ancoa river that use the same irrigation waters. These projects are currently at different development stages. The construction of the first one, Túnel Melado, is scheduled for the third quarter of 2015.

In other parts of the country, the company has seven more run-of-river projects in the works, with installed capacities of between 5 and 30 MW. In addition, Besalco is conducting an environmental assessment for its first wind power project.

Its first Los Hierros project was awarded the Gold Standard for effective carbon reduction.

The company’s business manager, José Ignacio Lois, said in an email interview in March, 2015, “This great accomplishment fills us with pride.

Not only because of the everyday contribution of clean energy to our matrix, but for the strong alliances and praiseworthy relationships that we hold with the community and the different stakeholders of these projects.”

Nevertheless, improvement is the company mantra - looking for new ways to optimize projects and move in the direction of sustainable growth.

Hiring local workers is one way of optimizing.

In the case of Los Hierros and Los Hierros II, Besalco hired local construction workers and plant operation teams almost exclusively. The company sees this policy as helping to maintain

it with all of its next projects. It also works hard to establish trust and open communication with local communities.

Understanding the needs and troubles of the community and the stakeholders of the project, beyond an economic scope, is of crucial importance. Thus, our strategy has always been to involve them in the project development from the very beginning,” declares Business Manager Lois.

FOR

BESALCO ENERGIA,

sustainable growth has been a key corporate value from the beginning.

It also works to develop programs that develop and engage the community in a sustainable culture, including an educational initiative involving around 40 schools of the Maule Region.

For them the company developed a course exploring relationships between the environment, energy production, and sustainability. It included a contribution of more than 5,000 trees, some of which the children planted themselves.

The agriculturalists whose fields are irrigated by the canals the company uses to produce energy are served by a partnership between the company and the Asociación Canal Melado (ACM). This association represents around 2,000 farmers from the Province of Linares.

6

Besalco’s business manager told us, “it is a critical relationship that we carefully nurture and we take pride to say that it’s still just as strong as the first time they trusted us with their canal.”

Sometimes Lois worries about potential local challenges, noting that, “We are currently working in localities with very strong and organized communities. Still, we’ve managed to rise to the challenge and learned how to turn this into a positive situation.”

He believes that an organized community is stronger when it has clear convictions, effective communication channels, and a solid structure.

Such a community encourages the company to initiate information exchange, deepen its understanding, refine its dialog, and maintain a fluent and efficient communication process.

In addition to local community relations, the company builds good relationships with their suppliers and consultants, some of whom are

local or, at least, regional. Andritz Chile, Siemens Colombia, and Rhona have all supplied the company with essential, high quality equipment.

Lois appreciates not just the quality of their

products, but also the reduced delivery times and after-sale support they provide. He also appreciates the great relationships the company has with its consultants and other service providers.

The company combines open communication with stakeholders with

Moving forward, BSER is looking forward to the construction of its first wind power project and the new contacts it will make in that process. The company aims to continue to diversify its energy matrix, as the country’s renewable resources and development support diversify.

HIGH QUALITY ENGINEERING AND ENVIRONMENTAL STUDIES

to make sure that the information it transmits is accurate, trustworthy, and environmentally responsible.

It also looks forward to the new technologies in solar and geothermal power being developed, which will help renewable energy companies become increasingly more competitive. Not only will this growth be good for the companies, but also for Chile, boosting the country’s global competitiveness and advancing it toward respectable sustainable growth in conjunction with the rest of the world.

www.besalcoenergia.cl (56-2) 23312200

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