The National Government has presented a solution in order to guarantee the provision of electricity for over ten million Colombians throughout the Caribbean Coast

The National Government has presented a solution in order to guarantee the provision of electricity for over ten million Colombians throughout the Caribbean Coast

  • After several years of service provision failures, the National Government has made decisions in order to advance towards a structural and definitive solution for the electricity provision, distribution and commercialization scheme of the Caribbean Coast. Thus we will bring equity to the regions, by guaranteeing electrical access and coverage in an efficient and sustainable manner.  
  • Acting with the framework of the proposal, the National Government has offered to assume the long term pension liabilities of Electricaribe, worth $1.2 trillion, in order protect current and formers workers of this company as well as to improve its financial structure and make it more attractive for future investors.
  • In 2019, the company under intervention shall triple its investments for the maintenance of electrical infrastructure, which shall break the cycle of low historic investments and poor service provision quality.

Ministry of Mines and Energy. Bogota D.C. November 29th, 2018. The President of the Republic, Ivan Duque, presented a set of steps to find a structural and definitive solution for the provision of electricity throughout the region, during a meeting with governors, capital city mayors, Caribbean Coast legislators and important representatives from the industrial sector. In this manner, the President has taken the necessary measures in order to solve a problem that has affected the Caribbean region for several years. 

The road map to a solution involves the National Government's assumption of the long term pension liabilities from Electricaribe worth $1.2 trillion, for the sake of protecting the current and former works of the companies, improving its financial structure and making it more attractive for future investors. In this way, progress will be made towards a sustainable solution in the long term, which has been the objective set by President Duque.  

"Today, we are presenting a structural solution before the country so that 10 million Colombians from the Caribbean Coast will have electricity services with dignity, and this will help us to preserve the long term stability of the Colombian electrical market. This shows our willingness to build a country with more equity, as well as with coverage and access to public services, for the sake of the citizens and companies," President Ivan Duque stated.

Searching for a new operator

The National Government has decided to redirect the search process for an optimal and efficient operator, in order to incorporate the financial support of the Nation as part of the solution, with the objective of increasing participation, competitiveness and the probability of success.  

Ever since two years ago, Electricaribe has been under an intervention due to continuous deficiencies in the provision of electricity services, beginning the search for a new operator in order to guarantee investments estimated to cost $7 trillion pesos over the next 10 years.   .

The investment opportunity was analyzed by seven interested companies. However, only one of them presented the documentation for moving on to the prequalification stage, which had ended on the deadline set for November 16th.

On the same day, the Office of the Superintendent for Public Utility Services announced that the Auditing Agent's period for reaching a decision had been extended to November 30th, seeking to analyzing the implications for the energy market concerning: (i) the formal expression of interest by only one bidder, and (ii) its expected impact on the market competition regarding energy distribution and commercialization.  

Searching for an operator, with a more participative and structural process for the electrical market

The National Government, committed to the provision of electricity services for the Caribbean Coast, through a structural and definitive solution as well as with a long term vision for the Colombian electricity sector, has decided to redirect the currently valid process in search of a new operator, by adopting a series of measures that will increase participation, competitiveness and the probability of success with respect to the solution.

With the objective of raising the participation of potential operators and the chance for success, the Caribbean Coast's market may be segmented into two or more markets. Segmentation will include technical, financial and equity-based criteria.    

The process will restart during the first quarter of 2019. In the second and third quarters, there will be a prequalification stage for the bidders, as well as the processes of analysis and carrying out due diligence in addition to receiving firm proposals from interested parties concerning the distribution and commercialization markets within the Caribbean Coast. It is expected there were will be new operators during the fourth quarter of the upcoming year.

The provision of energy commercialization and distribution services throughout the Caribbean Coast is currently in an exceptional state and resolving this issue in a structural manner requires the development of a legal framework with a legislative and/or administrative origin that will allow the assumption of the pension liabilities and a study ono the limits of market concentration, among other topics. The development of such norms will take place simultaneously with the process of searching for an optimal operator and it will be essential in order to find a structural and definitive solution to this situation.   

The Caribbean Coast market current serves 2.6 million users in the Departments of Atlantico, Bolivar, Cesar, Cordoba, Guajira, Magdalena and Sucre. This figure represents 23% of the national energy demand. Over the years, the region has been accumulating an investment deficit in its electrical networks, which has led to deficient indexes regarding the quality of service provision. 

Network investment for the Caribbean Coast will be tripled by 2019

Next year, Electricaribe will undertake investments worth between $500 and $700 billion pesos for its electrical networks. These investments will be possible after the favorable opinion issued by the Inter-Legislative Commission for Public Credit in order to issue a guarantee for the Nation, which shall allow Electricaribe to use the available credit resources from a business fund corresponding to the Office of the Superintendent of Services.

Over the last 10 years, the company has invested, on average, almost $135 billion pesos in its electrical infrastructure. As a result of this low level of investment, the networks have deteriorated, thus generating a deficient provision of electricity services throughout the Caribbean region.

The Office of the Superintendent for Public Utility Services and the Auditing Agent will take the necessary administrative steps in order to secure transparency, relevancy and efficiency during the implementation of the scheduled investments set for next year

The participation of territorial entities and users through the timely payment of invoices and the legal use of the service shall also be essential in order to start taking the road towards a structural and definitive solution.

The intervention of Electricaribe by the Office of the Superintendent for Public Utility Services (SSPD) shall continue until the end of the search process for a new operator. The SSPD will manage, together with the auditing agent, the request of resources from the financial system and the purchase of energy from market generators. Participation in the solution by all the stakeholders will guarantee the provision of electricity services for the seven departments of the Caribbean Coast.

Thursday, November 29, 2018, Cundinamarca, Bogotá D.C., Source: MinMinas
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