OREANDA-NEWS. Energy oversupply in Peru has reached about 50%, significantly pressuring the prices and profitability of suppliers and likely creating a challenging environment for new investment, according to a new Fitch Ratings report.

"A prolonged period of oversupply with low spot prices is likely to discourage new investments," said Josseline Jenssen, Director at Fitch Ratings. "Capacity has outpaced demand due to the economic slowdown, with low metal prices and stalled projects affecting energy demand during the last two years."

A large gap between regulated tariffs and spot prices is unsustainable. In spite of oversupply and low spot prices at 14.7 USD/MWh, regulated tariffs for residences and small - to medium-sized businesses increased 13% and 17% in 2015, respectively, and act as a significant component of inflation.

Current capacity stands at 9,391 MW, compared with peak demand of 6,189 MW as of August 2016. Projects under development will add up to an additional 4.4 GW of installed capacity between 2014 and 2019, a 40% increase since 2013. Peru's new 1,134 km gas pipeline is expected to come on line by 2019 and could exacerbate energy oversupply.