TN PETRÓLEO

Chilean generator and gas distributor GasAtacama could still go bankrupt despite efforts to keep it financially afloat, a source with knowledge of the negotiations told BNamericas.

Although GasAtacama reached a tentative agreement with several mining clients that would keep it in business, negotiations with the remaining major mining companies have been difficult, the source said.

"The negotiations are intense and there are some companies that do not want to sign on to the deal," the source said.

"Everyone wants to reach some kind of an agreement, but some of the companies want a deal with a longer-term equilibrium. I imagine a deal will be reached because it would be the most reasonable outcome, but there is a chance that GasAtacama will end up in bankruptcy," the source said.

GasAtacama, controlled by Endesa Chile and Southern Cross, announced on April 2 that it had reached a preliminary deal with resource group BHP Billiton (NYSE: BHP), Chile`s state copper company Codelco and copper miner Collahuasi to avoid a financial meltdown.

The latter three account for 70% of unregulated power consumption on Chile`s northern grid (SING).

GasAtacama wants the remaining 37 unregulated customers on the grid to join the agreement by April 21. Miners Anglo American (LSE: AAL), Antofagasta Minerales, Barrick Gold (NYSE: ABX), Freeport-McMoRan Copper & Gold (NYSE: FCX), Soquimich and Xstrata account for 26% of unregulated consumption on the SING.

Discussions with the Luksic Group, which controls Antofagasta, have been the hardest, the source said.

Chile`s energy minister Marcelo Tokman is attempting to convince all the power clients to join the agreement in an effort to preserve grid stability, according to the source.

According to the US$600mn deal that would last through December 31, 2011, GasAtacama and its shareholders would pay 26% of the increased generating costs, while large miners would foot the remaining 74%.

The agreement, however, only would work if at least 84% of the unregulated power demand was accounted for in contract.

GasAtacama has seen its costs soar as it has been forced to generate with expensive diesel in the absence of Argentine natural gas. The company, which operates in copper-rich northern Chile, had been unable to pass on increased costs.