Venezuela: Gov’t to Partner with Siemens to Recover Electric Grid

Mérida, August 25, 2022 (venezuelanalysis.com) – The Nicolás Maduro government is reportedly negotiating with Siemens Energy AG in an effort to improve Venezuela’s electricity system.

According to Bloomberg, the global energy giant received licenses from the US Treasury Department to work with Venezuelan state oil and electricity companies PDVSA and Corpoelec to repair thermoelectric plants in the country but without increasing their capacity.

Siemens’ business manager in Venezuela, Eric Soto, stated that the German company would begin by working on two gas and diesel combustion facilities that could supply as much as 1,000 Megawatts (MW) to the capital Caracas. It would address the electrical infrastructure used by the oil industry as well.

Soto added that a first license allows Siemens to collaborate with Corpoelec on thermoelectric plants in Miranda state. A second license that expires in October grants the firm permission to sell and repair components used in PDVSA plants. The US Treasury and its Office of Foreign Assets Control (OFAC) have not issued any public statements on the matter.

The business outlet went on to reveal that the Venezuelan government has drafted a plan to invest US $1.5 billion to revamp the nation’s electric grid by 2025 with 9,000 extra MW.

The Caribbean nation’s power generation and distribution infrastructure has suffered from a lack of maintenance, corruption and a brain drain, with the issues heavily compounded by wide-reaching US sanctions.

Washington’s unilateral coercive measures deprived Venezuela of export revenues while also barring the country from financial markets. State companies found it much more difficult and expensive to import spare parts. Additionally, threats of secondary sanctions and overcompliance meant firms like Siemens would not sell or service equipment.

Fuel shortages, another direct consequence of sanctions, meant that thermoelectric plants were no longer operational, increasing the dependence and strain on the Guri Dam. The 10,000 MW-capacity hydroelectric power plant in eastern Venezuela currently provides some 80 percent of the country’s electricity.

As a result, the country is barely able to meet the current demand, estimated by unofficial sources at around 10,500 MW, despite maximum capacity standing at some 32,000 MW.

In early 2019, Venezuela suffered a string of widespread blackouts that covered virtually all of its territory following alleged terrorist attacks. Outages in some locations lasted for over a week. Authorities have managed to stabilize and improve the electric grid in the three years since, though blackouts and rationing remain a common occurrence on a regular basis, especially in western Venezuela which is the furthest away from the Guri Dam.

Power outages have also had an impact on the oil sector, often causing extraction and refining operations to be suspended. Experts add that any robust economic growth that entails the recovery of the oil and heavy industries will inevitably require a higher electricity generation capacity. Venezuela grew in 2021 for the first time in seven years, and most forecasts have the nation’s GDP growing by double digits in 2022.

Siemens has operated in Venezuela for 60 years. The German company and General Electric were historically the two main suppliers of technology for thermoelectric plants. Siemens was involved in a corruption scandal after admitting to paying more than $18 million in bribes to Venezuelan officials in order to obtain favorable treatment in project tenders. The electronics giant paid $1.6 billion in fines to German and US regulators in a settlement.