Jose Estela

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Volcan Case Study: Solving the EnergyChallenge: Investing in Renewables to

Power Expansion

Jos Estela Ramrez

Energy [email protected]

September 26, 2013


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1.- Introduction to Volcan Mining Company

2.- Volcan hydroelectrical investment

3.- Volcan own electrical system

4.- Challenges to develop hydroelectrical plants

5.- Conclusions

INDEX

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INTRODUCTION

Large Scale Peruvian mining company,

established in 1943, (70 years).

Located in the central highlands of

Per. Operations in Lima, Junn and

Pasco Regions.

It has 3 mining units: Yauli (50% ofthe total sales), Chungar (32%) and

Cerro de Pasco(18%).

Volcan is a pollymetalic producer of

Zinc, Silver and Lead.

Volcan is an important energy

consumer. In 2012 it required 610

GWh and 80 MW of Power.

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1. INTRODUCTION TO VOLCAN MINING COMPANY


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Volcan Mines

Company was

created, with Ticlio

and Carahuacra

mines.

Volcan bought

Paragsha and Cerro de

Pasco mines including08 small hydros

totalling 7.5 MW.

Volcan bought Mahr

Tnel, San Cristbal

and Andaychagua

mines.

1943 1997 1999

Volcan bought

Chungar and Vinchos

mines with 2 hydrostotalling 9.7 MW.

2000

C.H. San Jos

INTRODUCTION

2. VOLCAN HYDROELECTRICAL INVESTMENT

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Volcan bought

Zoraida mines inYauli.

C.H. Baos IV

2007 2008 2009

Volcan bought El

Pilar mine and

beganexplorations in both

Alpamarca and Ro

Pallanga projects.

Volcan put into

operation a small

hydro with 3.3 MW(Baos IV) totalling

13 MW.

Dec. Volcan did

an electricalplanning in the

long run.

2009

INTRODUCTION

5

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Feb. Volcan

bought a Hydro in

operation (calledHuanchor) with

19 MW, totalling

32 MW.

Huanchor Hydro Baos V Hydro

Volcan will put into

operation two hydro

projects calledChancay II (40 MW)

and Belo Horizonte

(180 MW)

Jan. Volcan will

begin the

construction of anew 20 MW

Hydro, called

Rucuy.

July.Volcan put

into operation a

new hydro calledBaos V with 9.2

MW, totalling

41 MW.

2012 2012 2014 Medium Term

Rucuy Hydro Belo Horizonte Hydro

INTRODUCTION

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For energy availability:

Enough Energy close to its operations. Volcangenerates 300 GWh-year. It also has suitable

geographical conditions.

For a lower cost of energy and transmission

fee:

The energy production cost is the third part of

the total network cost. The trasmission fee is a

means of subsidies of the electrical system

exceeding costs.

For electrical reliability:To have more supply connections with a

minimum of interruptions.

WHY DOES VOLCAN INVEST IN HYDROELECTRICAL PLANTS?

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To diversify its investment: Volcan is

looking to optimize and diversify itsbusiness.

To avoid Electrical System problems:

Energy prices increasing, load rejection,

overload of transmission lines, anduncertain future in energy generation.

Itslooking to be friendly with the

environment:

It takes care of the environment with

renewable energy (CDM) and contributes

to the social-economical development of

the nearby comunities.

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WHY DOES VOLCAN INVEST IN HYDROELECTRICAL PLANTS?


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They do not pollute the environment.

It produces Carbon Bonds

Low operating cost.

No water consumption

Long lasting useful life

Low maintenance cost

WHY DOES HYDRO MAKE SENSE OVER OTHER FUEL SOURCES?

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ENERGY COST IN THE LATIN AMERICAN INDUSTRY

Source: Ministery of Energy and Mines

2012

Year 2011-2012

Peru 5-10%

Brasil 12-18%

Chile 15-20%Colombia 15%-25%

Mexico 25%-30%

Energy Cost / Operating Cost

Large Scale Mining


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3.- VOLCAN OWN ELECTRICAL SYSTEM


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S.E. Francoise

S.E. Animn

CHUNGAR

S.E. Paragsha II

CERRO DE PASCO

S.E. Tingo Mara

Belo Horizonte

hydro 180 MW

Baos V hydro +others

21 MW

S.E. Alpamarca

S.E. Pomacocha

Huanchorhydro

20 MW

S.E. San Antonio

YAULI

S.E. Pachachaca

SEIN

S.E.

Carhuamayo

Chancay Hydro

60 MW

S.E. Shelby

S.E. Ticlio

25km

3.- VOLCAN OWN ELECTRICAL SYSTEM

270 km in transmission lines

41 MW in operating Hydroelectrical plants 240 MVA in 25 electrical substations

2 Energy control centers with SCADA system (smart grid)

140 MM US$ investment in electrical assets in 4 years

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PASCO

LIMA

HUANUCO

JUNIN


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4. HYDROELECTRICAL INVESTMENT CHALLENGES

2.- To manage long

administrative

authorizations(EIS 2 years)

3.- To have a good StakeholdersManagement (Identify and attend them)

4. To be socially

responsible(Work in harmony and

giving opportunities)

1. To have an experienced team(Come from the Energy Generation Sector)

ENERGY

Volcan Energy area works with 07 communities near its 11 hydros


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C.H. Baos I C.H. Baos II C.H. Baos III

C.H. Baos IV C.H. Baos V C.H. Cacray/Yanahuin

C.H. Huanchay/Shagua C.H. San Jos C.H. Huanchor

EXPERIENCED TEAM: POWER HOUSE OPERATORS


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Maintenance Control Center

SupervisorsManagement Staff

EXPERIENCED TEAM: MANAGEMENT STAFF

Operator

Maintenance,

Supervision and

Control

Total = 120 People for O and M and other services. 60% come from communities.


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SOCIALLY RESPONSIBLE

Workshops for teachers Helth Campaigns

Construction of Schools Construction of bridges Street sidewalk construction

Donation of Alpacas


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Volcan mining growth has been accompained by an energetic growth in

generation, transmission and transformation.

Volcan has 41 MW in hydroelectrical plants that represent today 40% of

its electrical demand.

Volcan will continue investing in hydros to cover 100% of its electrical

demand and it is now considering the energy business.

Volcan has invested 140 MM US$ in electrical assets in the last 4 years.

Volcan bets for renewable energy generation to optimize its energy

operating cost, give more reliability to its operations and assure the

electrical supply to its mining projects.

Volcan Energy contributes with the Sustainable Social Development of07 communities around its hydroelectrical main plants.

Volcan hires 120 people for the Operation, Maintenance and Services for

its 11 hydroelectrical plants, of which, 60% are sorrounding communities.

5.- CONCLUSIONS

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VOLCAN ENERGY GENERATION VIDEO

(5 minutes.)

September 26, 2013Jos Estela Ramrez

Energy [email protected]
http://localhost/var/www/apps/conversion/tmp/scratch_1/SUBTITULADOHidroel%C3%A9ctricas%20Volcan_23%20mayo.mp4http://localhost/var/www/apps/conversion/tmp/scratch_1/SUBTITULADOHidroel%C3%A9ctricas%20Volcan_23%20mayo.mp4http://localhost/var/www/apps/conversion/tmp/scratch_1/SUBTITULADOHidroel%C3%A9ctricas%20Volcan_23%20mayo.mp4http://localhost/var/www/apps/conversion/tmp/scratch_1/SUBTITULADOHidroel%C3%A9ctricas%20Volcan_23%20mayo.mp4http://localhost/var/www/apps/conversion/tmp/scratch_1/SUBTITULADOHidroel%C3%A9ctricas%20Volcan_23%20mayo.mp4

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