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Chile speeds up coal plant closure plan, agrees to shut newest facility

Engie SA will close its newest coal-fired power plant in Chile after just five years of operations as part of the country's efforts to become carbon neutral, the company said Dec. 9.

Commissioned earlier in 2019, the 334-MW Mejillones plant in northern Chile will now close by the end of 2024.

"This is great news for the Chilean people. Almost 700 MW of coal-fired plants will close early to be replaced by renewable energy, providing us with cleaner, cheaper electricity," Chile's energy minister, Juan Carlos Jobet, told the COP25 climate change conference in Madrid.

He added that AES Corp. had also agreed to bring forward by two years the closure of its Ventanas I and Ventanas II plants to 2020 and 2022, respectively.

The announcements mark the first fruit of attempts to improve a deal reached last June with energy companies to close all of Chile's 5,000 MW of coal-fired generation by 2040, including 1,000 MW by the end of 2024.

Under that plan, the Mejillones complex was due to close by 2040. Engie said the decision to close the plant formed part of its transition to clean energy technologies. Work began on the plant in 2014 and was the last of a string of coal-fired plants built in Chile after neighboring Argentina cut off supplies of natural gas a decade earlier.

However, following pressure from environmentalists and communities, the government has been studying the possibility of closing the plants even earlier. "We have been talking to the energy companies for some time about the possibility of closing the coal plants early," the minister said.

Chile generates almost 40% of its electricity from coal and another 20% from gas. But it aims to become net carbon neutral by the middle of the century through the development of renewables, reforestation and other measures.

The South American country imports almost all the coal it needs. In 2018, imports totaled 11.1 million tonnes, largely from Colombia, the U.S. and Australia.

The minister said energy companies are developing almost 3,500 MW of renewable projects in the country. However, a key challenge will be to build the transmission lines necessary to move electricity from solar parks and wind farms in the arid north of the country to the major cities in the center.

Engie said it has signed a long-term loan for $125 million from the Inter-American Development Bank to finance renewable energy projects.

Henry Edwardes-Evans and Tom Azzopardi, who contributed to this article, are reporters with S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.