Unplanned outages add pressure to Colombia’s generators

Recent unplanned outages of some Colombian power generation plants have impacted about 10 percent of the country’s power generation supply in March, according to Fitch Ratings.

This situation, coupled with low hydrological conditions, increased electric rationing risk by adding pressure to the system to meet growing demand driven by the residential sector.

Colombia’s electricity generation companies and distribution companies could experience temporary pressure on EBITDA generation should an electric rationing scenario materialize in the short term.

The impact on cash flow generation will depend on the extent of this condition, as well as the exposure each Genco has to the eventual markets or geographic areas affected by rolling blackouts.

Fitch believes major Gencos, such as Empresas Publicas de Medellin S.A E.S.P. (EPM, rated ‘BBB+’) Isagen S.A. E.S.P. (rated ‘BBB-‘) and Emgesa S.A. E.S.P. (rated ‘BBB’) could absorb some stress levels without permanently deteriorating their credit qualities. These companies maintain adequate capital structures and ample liquidity sources to cope with temporary pressures on EBITDA generation.

Fitch maintains its negative outlook on the Colombian electric sector for 2016. Fitch continues to expect a challenging year for the sector led by the El Nino phenomenon, which is causing around 50 percent reduction in rainfall in Colombia, compared to historical averages. Further pressures derive from regulatory weaknesses that are causing pressures on EBITDA generation of companies that operates thermoelectric plants, of which variable cost are higher than the price they receive for their energy sales under the current conditions.

The El Nino phenomenon, along with operating failures, reduced any leeway for the system to meet electric demand in the following two months. The market manager, XM, adjusted the water reservoirs to account for the forced outage in Guatape, the hydroelectric plant owned by EPM, so the reserves as of February 29 closed at 5,185 Gwh, 30 percent of the total capacity, down from 9,041 Gwh at end of January 2016. The system’s response to try to rebalance the energy supply includes increasing the load factor of hydroelectric plants, the total utilization of the thermoelectric matrix, the purchase of up to 7Gwh of energy from Ecuador, and incentive plans to reduce energy demand.

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