Chile yet to confirm economic feasibility of Humboldt trans-Pacific cable

The Chilean government is still in the process of validating the economic feasibility of the Humboldt trans-Pacific submarine cable project, which has undergone scheduling changes since it began in 2017 with prefeasibility studies.

“We are together with our strategic partner in a pre-sale process to ratify the economic viability of the project,” Patricio Rey, general manager of Chile’s state-run infrastructure fund Desarrollo País, told BNamericas.

“With a positive result, during 2023 the company that will carry out the works should be selected,” Rey added. If all goes well, the project should be completed in 2025/2026, he said.

Desarrollo País, majority-controlled by the state and responsible for the project, selected in December Singapore’s H2 Cable as strategic partner for the Humboldt cable. Together, Desarrollo País and H2 will oversee works, sales, investments and, among other things, hire the cable builder.

However, they already hired International Connectivity Services, belonging to Hawaiki Group, to finalize the system design, kick-start the recruitment process, and connect with potential key customers.

According to Desarrollo País, a special purpose vehicle (SPV) will be created as the cable’s owner. This SPV will comprise Desarrollo País and other public and/or private companies from countries that will finance the project.

Initially, investments of US$650mn were mentioned, but current estimates are US$400mn.

ALSO READ: Inside Chile’s US$650mn LatAm-Asia Pacific cable project

Desarrollo País and H2 are expected to fund a part of the total, another part is deemed to come from financial institutions and interested governments, while the bulk should come from pre-sale agreements with companies for the use of the data transport structure.

Desarrollo País does not report how many private partners (such as datacenter companies, interconnection companies or even operators) are on board or have formally expressed interest in the project.

As for public partners, so far only Brazil and Argentina have formalized interest, but only through memorandums of understanding, without any financial contribution to the project.

Desarrollo País said that there is interest from other countries and preliminary talks are ongoing, but nothing official has been agreed.

In March last year, transport and telecoms minister Gloria Hutt said Chile received over 20 financing proposals for the project. 

ROUTE AND DEMANDS

Extending 14,810km, the cable’s core route will directly connect Chile (Valparaíso), New Zealand (Auckland) and Australia (Sydney), but other branches are possible.

Desarrollo País said there is no intention of reaching China, the world's second largest economy, which would certainly increase the commercial appeal of its use. The initial design even included a possible a China route, but the option was later discarded.

Indirectly, through interconnections with existing cables in Sydney, for example, the cable could connect to Japan and other Asian countries, although this would have implications for latency of the entire system.

For the Chilean fund, one of the main benefits is “geopolitical-strategic” related.

Desarrollo País aims at Asia, even though the project reaches directly only as far as Oceania.

On its Humboldt hot site, Desarrollo País says all current Chile-Asia communication routes pass through US infrastructure and that the project will give Chile “greater independence in its communications.”

Also, the cable “generates a new communications channel that contributes to resilience and redundancy and may be of interest to companies to strengthen the robustness of their networks.”

Finally, the fund sees Humboldt as increasing the communication capacities of Chile and South America in a scenario of “explosive increase in traffic with 5G and the internet of things.”