Government on Electricaribe crisis

Company News, Electricity, Financing    Dec 7, 2018 12:44 PM

The Electricaribe crisis has affected the energy supply on the Caribbean coast in the last years. The government has been working on alternatives to solve this crisis, and the Ministry of Mines and Energy (MinMinas) spoke on the government’s strategies for this issue.

According to a press release, the government plans to assume the long-term liability of Electricaribe (CoP$1.2T). MinMinas explained that the goal is improving the company’s financial structure, making it more attractive and protecting its workers.

“These decisions allow us to move towards a structural and definitive solution to the electricity supply, distribution and commercialization scheme in the Caribbean Coast,” the statement said.

Iván Duque, President of Colombia, said that 10 million Colombians will benefit, having a quality energy service.

“It helps us preserve the stability of the Colombian electricity market in the long term,” said Duque.

The government recalled that Electricaribe was intervened three years ago due to its continuous deficiencies in the electric power service. Authorities began the search for a new operator to guarantee CoP$7T investments in the next 10 years.

MinMinas highlighted that the bidding process to find a new operator will resume in 1Q19, and the prequalification phases and receipt of bids will be in the next two quarters.

“It is expected to have the new operator in 4Q19,” said MinMinas.

The government explained that it is necessary to develop a regulatory framework to assume the pension liability of Electricaribe and conduct a study on limits of market concentration, among other issues.

“This regulatory development will be carried out in parallel with the search process of a suitable operator and will be decisive for the structural and definitive solution of the situation,” said MinMinas.

The government announced that Electricaribe will triple its investments in infrastructure maintenance to improve the service quality in the region.

“Electricaribe will make investments that will range between CoP$500B and CoP$700B in its facilities,” the statement said.

MinMinas recalled that the company has invested only CoP$135B in its electricity infrastructure in recent years, generating poor service in the Caribbean region.

Bottom-Line: The country was waiting for this type of news for some time. The Colombian government does well to assume the firm’s liabilities, which will increase the firm’s attractiveness to investors.

The regulatory framework should be flexible and offer good conditions to attract the operators’ interest in this new bidding process.

One of those conditions should be ensuring that Electrocaribe’s clients – including governments – actually pay their bills.

 

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