How Can Colombia Improve Electricity Supply on its Coast?
Colombia has launched a process to find a replacement for Electricaribe to supply electricity to more than 10 million customers on its Caribbean coast. The government in 2017 had ordered the liquidation of Electricaribe, a subsidiary of Spain’s Gas Natural, due to perceived deficiencies in its electricity services. Why did Electricaribe’s services fall short of expectations, and what is the Colombian government looking for in its replacement? How big of a challenge is supplying electricity in Colombia’s Caribbean coast, and what are the most significant issues that the new power provider could face?
Leopoldo Olavarria, partner and head of energy in Latin America at Norton Rose Fulbright: “When Electricaribe was intervened, its earnings were insufficient to meet its investment requirements and operational expenses. The main causes were theft of electricity and lack of electricity bill payments by public entities. That operational deficit resulted in recurring service interruptions, affecting its customers. The Duque administration is seeking a definitive solution to a historically deficient service in the region. By carving out Electricaribe’s pre-existing pensions liability (about 1.2 billion pesos), a big obstacle to financially sustainable operations is removed. A new qualified operator will be sought for each of the two new regions, who must meet the government’s minimum investment requirements. This should lead to improvements in electricity service. The seven departments that Electricaribe must serve represent up to 25 percent of Colombia’s total demand. There are a few potential investors with the required qualifications for such a large market. To increase the number of potential bidders, the government created…”Read More
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