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Prof. Dr.

Andreas Suchanek





The Unsustainable Behavior Of Chilean Energy
Suppliers And The Relation To Their Public Image





Name: Albert Benjamin Wessling Biermann
Matriculation Number: 1081707
Course: Corporate Responsibility in a Globalized World
Due Date: 26.05.2014


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Table of Contents


List of Abbreviations ................................................................................................................ III
List of Figures ........................................................................................................................... III
List of Tables ............................................................................................................................ III
1. Introduction ......................................................................................................................... 1
2. The Energy Industry in Chile ............................................................................................... 1
2.1 The Energy Generators ................................................................................................. 1
2.2 The Transmission Companies ...................................................................................... 1
2.3 The Distributing Companies ........................................................................................ 1
3. Relevant Inconsistencies in the Energy Generating Market .............................................. 2
3.1 Endesa ......................................................................................................................... 2
3.2 AES Gener.................................................................................................................... 2
4. Relevant Incidents which lead to Relevant Inconsistencies ............................................... 3
4.1 Bocamina I ................................................................................................................... 3
4.2 Bocamina II ................................................................................................................. 3
4.3 Laguna Verde ............................................................................................................... 4
5. Conclusion and Suggestions ............................................................................................... 4
Reference List ............................................................................................................................. 5
Appendix .................................................................................................................................... 6





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List of Abbreviations
SING - Sistema Interconectado del Norte Grande
SIC - Sistema Interconectado Central
List of Figures
The main companies involved, in terms of installed capacity, are the following:
ENDESA (35%,6085 MW)
AES Gener (18%, 3157 MW)
Colbn S.A. (15%, 2621 MW)
Suez Energy Andino (12%, 2176 MW)
E.E. Guacolda (3%, 610 MW)
Pacific Hydro (3%, 551 MW)
List of Tables

SISTEMAS SEGMENTOS
GENERACIN TRANSMISIN DISTRIBUCIN
SING EDELNOR
ELECTROANDINA
CELTA
NORGENER
GENER
GASATACAMA
EDELNOR
ELECTROANDINA
NORGENER

EMELARI
ELIQSA
ELECDA
SIC ARAUCO GENERACIN
PETROPOWER
GENER
SAN ISIDRO
ENDESA
COLBN
GUACOLDA
E. VERDE
S. E. SANTIAGO
PANGUE
PEHUENCHE
PILMAIQUEN
ACONCAGUA
S. C. DEL MAIPO
H. G. VIEJA Y M. VALPO.
E.E. CAPULLO
GEN. S. ANDES
CARBOMET
TRANSELEC
STS
TRANSNET
TRANSQUILLOTA

CHILECTRA
CGE
CHILQUINTA
RIO MAIPO
SAESA
FRONTEL
EMEC
CONAFE
EMELECTRIC
EMELAT
PUENTE ALTO
COPELEC
LITORAL
LUZAGRO
EMETAL
COLINA
LUZPAR
AYSEN EDELAYSEN EDELAYSEN
MAGALLANES EDELMAG EDELMAG


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1. Introduction
Most Energy Suppliers find themselves mostly in oligopoly like markets, there are
only a few competitors and high demands by the community. However, a lot of
Energy Companies are concerned about their Public image and how their
Corporate Responsibility Campaigns are received by the Public, they want to have
a green and sustainable image. The problem is that a lot of companies do not act
according to their ethical or sustainable codes of conduct, particularly in third
world countries the moral threshold seems to be lower. Chile is an example for a
third world country were such relevant inconsistencies occur and will serve as an
example to discuss whether or not energy suppliers take advantage of missing
regulations. In particular Energy Generators and the construction of new Power
Plants.
2. The Energy Industry in Chile
The Energy Market in Chile is divided in three different types of activities: The
generating companies, the transmission companies and the distributors. All of
them are private capital companies which are regulated by the general electric
service law (DFL-4, Art. 7). This law also limits the participation of generators
and distributors in the Electric power transmission.
2.1 The Energy Generators
The Generating Sector is highly concentrated. Three companies are dominating,
AES Gener, Endesa and Colbn with over 75% market share and 90% of the
contracts in the market. In the last 4 years this three companies have earned
$6200 million dollar.
2.2 The Transmission Companies
The Transmission market is widely dominated by Transelec a former Public
Company which later was owned by Endesa and is now largely owned by a
Canadian company. However, the Transmission market works in an open regime
which means that new company can participate in the expansion of the system
and access existing installations.
2.3 The Distributing Companies
In the distributing sector two major Companies stand out from the rest, Chilectra
affiliated company of the ENERSIS Group which also controls Endesa with a
50,5% market share
1
and CGE Distribucin with a market share of 23,23%. The
rest is distributed between other minor actors.

1
http://web.ing.puc.cl/~power/alumno01/contratos/contratos.htm#Participacin de
Mercado


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3. Relevant Inconsistencies in the Energy Generating Market
The high market share of energy generating companies in Chile, puts them in a
position of high power and control. They are regulated by specific laws in order to
limit the creation of Monopolies but nevertheless the biggest companies have
participation in every relevant sector of the Energy chain. However, the
discussion is about the installation of new Power Plants in urban areas and the
harm they cause to the environment. Specifically the following installations
should be discussed
Bocamina I (Endesa)
Bocamina II (Endesa)
Laguna Verde (AES Gener)
One of these Power Plants is under the List of the most contaminating Power
Plants in Chile with an estimated cost of $419 Dollar per Megawatt produced
2
and
the other ones are facing major lawsuits for not regulated and harmful activities
3
.
But they have one thing in common, they are owned by the two major generating
companies of Chile Endesa and AES Gener.
3.1 Endesa
Endesa Chile is the largest electric utility company in Chile. It was created as a
subsidiary of the state-owned CORFO in 1 December 1943 and was privatized in
1989
4
. The Vision Statement of Endesas says that they want to be A responsible,
efficient and competitive multinational company, committed to safety, health and
the environment. In addition to that they publish everywhere their Values, which
include Ethical behavior and commitment to the community and the
Environment, which as we will see in the example of Bocamina I and II is highly
questionable.
3.2 AES Gener
AES Gener is a producer and distributor of electricity in Chile. Formerly known
as Chilectra Generacion and Gener. AES Gener is the result of the division in
1987, Chilectra into three independent companies.
5
AES Gener mission statement
says "Mejorar vidas al proporcionar soluciones de energa seguras, confiables y
sostenibles en todos los mercados que sirve" which means Improving lives by

2
http://www.veoverde.com/2013/10/conoce-las-10-termoelectricas-mas-contaminantes-
de-chile/
3
http://www.reuters.com/article/2014/01/29/chile-endesa-bocamina-
idUSL2N0L326820140129
4
http://en.wikipedia.org/wiki/Endesa_(Chile)
5
http://en.wikipedia.org/wiki/AES_Gener


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providing safe, reliable and sustainable energy solutions in all the markets it
serves.
4. Relevant Incidents which lead to Relevant Inconsistencies
The presented companies try to create a green image by showing codes of ethical
conduct, images of green nature and repeatedly stating their commitment to the
environment. They both also own Foundations with which they want to show
their commitment to the community and Social responsibility
6
. But how
coherent the intentions are with the actions they do, can be reflected with the
following examples.
4.1 Bocamina I
Bocamina Power Plant, built in 1970 in Coronel, Chile. A Thermoelectric Power
Plant which uses Coal as fuel to generate Energy. It is built near the sea and
settlements of the town of Coronel. Its Carbon Dioxide emission is about
966,919,000 kg per year and estimated to raise to 3,272,060,000 kg per year in
comparison a car produces up to 4000 kg per year. But the contamination with
Carbon Dioxide and the nearby settlements which are affected are only a part of
the problem. There has been a discussion about Bocamina I contaminating
marine wildlife, photos with large amounts of death crustaceans Exhibit 1. It led
to a temporary shutdown of the Power Plant in January 2014
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4.2 Bocamina II
Bocamina II Power Plant, built in 2012 in Coronel, Chile. A Thermoelectric Power
Plant which uses Coal as fuel to generate Energy. It is built near the sea and
despite the fact that there where large settlements of people of coronel built in a
normal urban area. Now there was no excuse and no reason to build the power
plant almost in the middle of the city center (The City center is only 1,5 Km away).
About the carbon dioxide emission of this power plant cannot be said much, has
it been put to work only recently. But with 2100 GW Production power it will
provide double the amount of energy as Bocamina I. As Bocamina I Bocamina II
faces serious environmental charges, the same damage caused by Bocamina I is
caused by Bocamina II which also led to a paralization of the Power Plant in May
2014
8
Local Fishermen Provided a Video in which the accused Damage can be
seen
9



6
http://www.fundacionaesgener.cl/, http://www.fundacionendesa.org/
7
http://www.reuters.com/article/2014/01/29/chile-endesa-bocamina-
idUSL2N0L326820140129
8
http://www.biobiochile.cl/2014/05/08/corte-analiza-nueva-solicitud-para-detener-
operaciones-de-bocamina-i-en-coronel.shtml
9
https://www.youtube.com/watch?feature=player_embedded&v=bJOTJLZsPcA


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4.3 Laguna Verde
One of the oldest Thermoelectric Power Plants in Chile built in 1939 updated in
1990
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Working near the City of Valparaiso without legal problems regarding the
contamination and harm to humanity and environment, since it is working till
1939. With only 54,7 MW it is also one of the most inefficient thermoelectric
Power Plant around. The Company in this case abuses the fact that the Power
Plant was built in a time without legal regulations and therefore they have no
legal obligation to conduct major changes in the operation of the Power Plant.
5. Conclusion and Suggestions
It is concerning how Companies in an almost Monopoly like market tend to abuse
their status, but nevertheless there is still room for improvement and agreements.
Two majors incidents have been discussed the two Bocamina Power Plants and
the Laguna Verde Power Plant.
In the Bocamina case Endesa is already working on providing possible solutions,
one of the first actions they took is to provide a fund of 1,2 million dollar per year
for the next 20 years in order to improve the nearby settlements and make a
living together more enjoyable. They could have thought of it before building a
Coal using Power Plant in a City Center and respected their own codes of conduct,
but it is not too late and they are showing improvement towards generating more
trust and creating a situation of mutual advantage.
In the Laguna Verde case the situation is more difficult. A Company which clearly
states their commitment to the environment using a highly contaminating Power
Plant give no good picture and promotes no situation of mutual advantage. The
solution would be to take a step back and showing interest in the community and
their concerns.
Energy Suppliers worldwide are in a situation of high power and therefore have to
be real careful how they treat with the trust of the community. Relevant
Inconsistencies can result quickly by not following their own codes of conduct.






10
http://www.aesgener.cl/Lists/Centrales/DispForm.aspx?ID=10


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Reference List

The 10 Most Contaminating Power Plants in Chile
http://www.veoverde.com/2013/10/conoce-las-10-termoelectricas-mas-
contaminantes-de-chile/
AES Gener Leads List of most Contaminating Power Plants in Chile
http://radio.uchile.cl/2013/09/01/aes-gener-lidera-top-ten-de-termoelectricas-
ineficientes-y-contaminantes-del-sic
Why the Chilean Energy Market no longer works properly
http://www.elmostradormercados.cl/destacados/electricas-4/

Endesa proposes millions fund in order to preserve the environment
https://www.df.cl/noticias/empresas/energia/bocamina-ii-endesa-propone-
crear-fondo-de-13-000-millones-para-coronel/2014-05-14/144539.html



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Appendix


Exhibit 1 Death crustaceans near Bocamina Power Plant


Exhibit 2 Death Crustaceans



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Exhibit 3 Bocamina Power Plant in the almost in the middle of the city (this is no industry area)