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Mexico, Cuba: Next Hot Spots for Energy?

Fortnightly Magazine - July 15 2000

more of the $250 million Campeche-sized projects."

TransAlta bid the proposed electricity cost for the plant at a fraction over 0.29 Mexican pesos per kilowatt-hour to win.

Farrell, too, notes that the lowest-cost kilowatt-hour criteria for winning new plant awards in Mexico presents a challenge for bidders, but also for Mexico itself, competing with other countries for increasingly scarce energy investment dollars.

"My sense is that for Mexico it is a great benefit if there are some subsidized power developers in the world that want to subsidize the cost of power in Mexico," she says.

Beyond the Embargo

Canada, France set up shop early in Cuba.

During the 1990s, as Cuba lost financial support from the Soviet Union and struggled to rid its dependence on oil, brownouts were common during the day at the best hotels ringing the central plaza of Havana. But now that 43 percent of the island's electrical generation comes from domestically produced energy, brownouts are less common. By the end of 2000, when Cuba expects to produce 70 percent of its total energy consumption, the brownouts may become a phenomenon of the past.

Nevertheless, U.S. companies still are barred from investing in the domestic economy of Cuba, thanks to the 38-year-old U.S. economic embargo of trade with the island. But the gradual thawing of U.S.-Cuban trade relations might mean that restrictions on infrastructure will be lifted before long, since the U.S. government has already loosened restrictions on telecommunications services and travel. In the meantime, Canadian and French power companies are stepping in to get established in the market.

HEIGHTENED U.S. INTEREST. "There has been a marked increase in interest by U.S. power generation companies toward Cuba during the last eight months," says John Kavulich, president of the U.S.-Cuba Trade & Economic Council Inc., of New York. "One of the focuses has been on the situation in which many of the U.S.-based power generating companies have global affiliates and global agreements, so that they are finding they are doing business with companies which have direct or indirect dealings in Cuba," he says.

One U.S. utility that took a pro-Cuba business stance-at least for a while-is Tampa Electric Co.'s TECO Power Services unit. TECO does business in a number of countries in Central America and the Caribbean. A TECO official was quoted late last year as saying that U.S. companies were "missing out" on opportunities in Cuba while foreign competitors were moving in.

CANADIAN VENTURES. One of the leading foreign investors in Cuba is Toronto-based Sherritt International, which has a subsidiary, Sherritt Power Corp., with growing investments in the nation. Sherritt Power and the state-owned electric utility, Union Electrica, formed the Energas joint venture to develop natural gas feedstocks and new electrical generating capacity. The venture is operating two gas-fired plants with a total output of 151 MW, says Patrice Merrin Best, the chief operating officer of Sherritt International. One project is located in Varadero, a beach resort outside of Havana. The other is in Boca del Jaruco, about 40 miles west of Havana, where the company is recovering associated