Juiced up: as economies boom on commodity trade, power demand will skyrocket.

Record-high prices of Latin American commodities like minerals and oil have made futures traders and finance ministers very happy over the past couple of years. Now electricity companies are taking note. With commodities through the roof, companies are scrambling to dig and drill. That means power producers--big consumers of cement and steel, as well as the hundreds of small items companies must buy, from laptops to work boots--are scrambling, too.

Metals analyst Platts predicts that Latin America will require 90,000 megawatts of new generating capacity by 2012 and suggests that annual demand will grow, on average, by 2.13% through 2007. That seems conservative compared to the outlook of the U.S. Energy Information Administration (EIA). Its latest report calls for consumption growth in Latin America of better than 4% on average through 2025, on par with developing Asia, even the extraordinarily power-hungry Chinese economy, at 5.4%. Developed economies, although much larger users, will see demand grow by 1.5%.

As oil and natural gas prices zoom, power companies are on the move to cover demand. Chile and Brazil are busy on new hydroelectric projects worth billions. In Mexico, the government has given the green light for private companies to invest in power generators via tender from the Comision Federal de Electricidad (CFE), the state-owned power company. The CFE will continue to monopolize the country's electricity transmission and distribution with Luz y Fuerza del Centro, another state-owned company.

"Generation capacity in Mexico has basically grown due to CFE projects," says Gerardo Cubos, a CFE spokesman. Since 2000, 21 power projects have come online, with private investment adding 9,358 megawatts of electricity, with total investments of US$5.65 billion.

In places such as Venezuela and Mexico, the public sector controls the national power grid. In Venezuela, private power companies will play even smaller roles as the government takes a larger hand. Electricidad de Caracas (EDC), a subsidiary of U.S. power company AES, produces more than 40% of Venezuela's thermoelectric energy. "That percentage will fall," says Andres Gluski, president of AES Latin America. The Venezuelan government will build new power plants and muscle in on EDC's market share, Gluski says.

During the first quarter of 2006, EDC's net energy output came to 2,273 gigawatt hours, down 68% from the same period a year earlier. But that's not bad news. The company earned $20.6 million during the first three months of this year after losing money during the same period a year earlier. While Gluski is optimistic when it comes to energy demand, new investments will be necessary in the future, he says. "Those countries with only one energy source will run the risk of getting caught in a bottleneck that will constrict growth," Gluski says.

No one is more aware of demand bottlenecks than big industry, particularly mining. Chile's state-owned copper company Codelco, the biggest copper producer in the world, for instance, is also the single-largest user of electricity in the country. The company consumes 38% of the power on the country's northern grid. Spending on power hit $250 million in 2005, up from $182 million in 1990. "New mines or expansions to capacity are behind these increases in the demand for energy," says Alvaro Vilaplana, deputy director for large contracts at Codelco.

Crucial. A steady supply of electricity is crucial to refining. Power outages can seriously disrupt the process and even inflict costly damages to equipment. Accordingly, Codelco owns stakes in generators on the grid, such as Electroandina and Edelnor. Together, they provide nearly half of the company's total energy use.

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EDUARDO CORONADO * SANTIAGO