Mitigating the Impact of Drought on Energy Production and Fiscal Risk in Uruguay

Uruguay’s state-owned public electric company, Administración Nacional de Usinas y Trasmisiones Eléctricas (UTE) generates more than 80% of its energy needs from hydropower plans. When rainfall and/or accumulated water reserves is low, UTE is forced to purchase alternative fuels (mostly oil and natural gas) to use as inputs for electricity production. When the price of oil is high, generation costs become very expensive, affecting UTE’s bottom line, and creating problems for both consumers and the national budget.