Rurelec has announced a deal that will see it develop new power generating capacity in Peru.

The UK-based firm is to be the anchor investor in a group of international investors that will acquire a 50 per cent interest in Cascade Hydro Limited, a newly-formed hydroelectric power development company focused on run-of-river projects.

It has secured an option for a 32 MW pipeline of projects in Peru that it will inject into Cascade when final due diligence on the deal is complete.

The deal is a first step in the company’s plans to replace the 538 MW of generating capacity that was expropriated by the Bolivian government in 2010 when it nationalised the electricity sector.

One of the first projects to be developed is the 4 MW Canchayllo hydropower plant in the Junín Province of Peru. The $8 million project is expected to take 18 month to build and was recently awarded a power purchase agreement in Peru’s latest round of renewable energy tenders.

Rurelec says that hydropower projects generate strong cash flow and have low operating costs.

“I am delighted to announce our expansion into Peru, which has been a long term strategy for the Company,” said Peter Earl, CEO of Rurelec. “Our investment in Cascade is the first small step in the process of replacing Rurelec’s 538 MW of installed capacity at Guaracachi.

“After three years of retrenchment, we are finally moving ahead again in Latin America with excellent new partners and with only limited exposure for Rurelec’s hard won cash resources.”

Rurelec also owns generating capacity in Argentina. It has started arbitration proceedings against the government of Bolivia in order to receive compensation of the loss of its 50 per cent stake in Empresa Guaracachi SA.