Steady Connection

What role does Colombia play in Endesa’s global strategy?

At the moment, Colombia represents one of the key operations of our company in Latin America. Colombia accounts for 35% of Endesa’s earnings before interest, taxes, depreciation, and amortization (EBITDA) in Latin America; we will close 2012 with $2.5 billion, and we expect to reach $3.5 billion by 2016. Currently, we have around 1,600 employees.

Endesa holds 48.48% controlling stakes in Codensa and Emgesa. How have Endesa’s operations evolved in Colombia since it was established in 1997?

Endesa’s operations in Colombia are very stable and well balanced in the power generation segment with Emgesa, and in the distribution segment with Codensa. In 2012, we celebrated our 15th anniversary in the country, and over this period we have consolidated our operations in Colombia. We carried out economic and management restructuring strategies at both Emgesa and Codensa. We have grown in terms of power generation assets with, for example, the acquisition of the Cartagena plant and the merger with Betania, among others. We have ongoing plans to expand our power generation portfolio with projects such as the expansion of Salaco to 144 MW. We expect that over the next two years we will reach 3,500 MW of installed capacity. In the distribution field, we have a similar story; we could increase our customer portfolio to more than 700,000 people, and today we have around 2.7 million customers in Colombia. Additionally, we have improved our rate of energy loss from 23% to 7.4%, and that has contributed to providing operational stability. Furthermore, we acquired a minority stake in Empresa de Energí­a de Cundinamarca (EEC), which supplies more than 255,000 customers in the Cundinamarca region. In regards to this, Endesa is keen on acquiring more distribution companies in Colombia, and we would analyze any potential operation, because from the legal and regulatory points of view—this is a regulated business—we have room to grow from the current 21% to a maximum of 25%.

What are your prospects for the “El Quimbo” project, and how will it impact the Colombian energy sector?

The project was born after a tender process initiated by the Colombian government, which in 2008 carried out the first energy tender in order to boost the construction of new infrastructure to cover energy demands until 2018. We presented this project and were awarded with 1,650 GWh per year of energy. In November 2010, we started construction of the Quimbo project. We expect to launch operations in December 2014. The investment for this project is around $837 million, of which $143 million is strictly allocated for the social and environmental aspect of it. At the moment, we have completed over 30% of the project with an investment of more than $267 million. We have also successfully carried out resettlement works with local communities and conducted research that will enable us to relocate the area’s wildlife with the lowest impact.

What are the plans to export energy to Ecuador once the project is finished?

As a company, we don’t export; however, some countries have signed bilateral energy agreements, like in the particular case of Colombia and Ecuador, and we are looking forward to boosting energy interconnections between Colombia and Panama. Generation companies only take part in the offering of energy, and governments alone decide whether they import or export it. In the last few years, and thanks to its strong and reliable hydroelectric energy matrix, Colombia has exported this energy to other countries, and we get our proportional take according to our levels of generation. I would also like to add that energy interconnections between countries pose an excellent opportunity to increase energy production in the country, and we believe that the Galapagos Agreement, which aims to export energy from Colombia to Chile through the Andean region, offers great opportunities for the local energy industry. Colombia’s geostrategic location and its energy production capacity are key elements for the country to increase energy production levels, as well as to become a key player in the regional energy arena.

What have been the main challenges in developing the Quimbo project?

It is a large project in which social and environmental issues pose the greatest challenges. Therefore, we have always worked extremely closely with local communities and authorities, as well as regional and national governing bodies. However, there is a large opposition group that kept a strong position against this and other energy projects in the country. We believe it has misled the public with inaccurate information, because we have complied with all the compromises stipulated in the contract, always putting our greatest efforts into the environmental and social spheres of the project.

What are Endesa’s main investment plans for the near future?

For the short term, we have an investment plan of about $180 million annually. In terms of projects, we are prioritizing the increase of electricity generation on the Bogotá River by 144 MW, which will cost over $43 million. We will also construct two sub-stations, Nueva Esperanza and Norte, at an estimated cost of $100 million. They will contribute to the consolidation of Bogotá’s energy supply.

What is your vision for the future of the energy sector in Colombia, and for Endesa’s operations?

The rules of the game have been pretty clear for the last 15 years; there are two fundamental laws, 142 and 143, which were passed in 1995 and 1996. They have been the key strategic plan for the development of the industry by establishing, among other things, tariff periods of five years. That stability in the sector allows companies to plan long-term investment projects. We believe that the sector will continue developing in the same way, and we have ongoing projects that will further consolidate our operations in Colombia. It is a very attractive country for investing in energy.

© The Business Year – November 2012