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Jorge Sáenz c.
The Ituango Hydroelectric Project has grown from the largest power generation project in Colombia in recent years to becoming a stone in the shoe for EPM finances, a risk to communities who they are on the Cauca, downstream of the dam, and a concern for the Colombian electrical system. The work is in the eyes of the National Agency for Environmental Licenses (ANLA) and at the sight of domestic and international investors with obligations of the company Antioquia.
ANLA has just imposed a preventive measure of immediate suspension of activities no priority to ensure the integrity of the project. Evaluates whether the company has taken the necessary control measures that could warn "of any collapse of the tunnel and sinking of the earth", causing the impoundment of the waters of the Cauca River, above of the dam site.
work related to "the recovery of the project under safe and reliable conditions". The director of the company Antioquia, Jorge Londoño De la Cuesta, said that it "complies with the requirements of different authorities and state control entities, including the expertise required by the ANLA. "
badociated with the contingency of labor, implies for EPM that" we will have less estimated project resources.We estimated that between 2019 and 2021, it contributed more than 3.5 billion dollars to the group and our financial plans included numerous investments in public infrastructure in Medellin, Antioquia and Colombia, "said Jorge Andrés Tabares, Vice President of Corporate Finance, EPM
Julio Ugueto, Leader of the EPM Rating at Fitch Ratings, points out that the delay of the project "leaves a significant impact on EPM's revenue growth." By not having Ituango's income, the measure of leverage (total debt on its Ebitda) is deteriorating and Is because there is no growth in expected income, "he says.
Hidroituango is a transformational project for the company, in terms of growth. "Only now, it will take more time," Tabares repeats. The market is attentive to the complex situation of the company, but at the same time, it is still considered a credit topic, says Ugueto. Fitch Ratings expects EPM to increase its total debt to $ 22 billion by 2019; about $ 23.5 trillion in 2020 and reach $ 24.5 billion in 2021.
"Delays, added to the expenses incurred by the company to deal with emergencies and damage to the business. Equipment infrastructure will continue to put pressure on the company's cash flow generation, "says Bernardo Costa, vice president – senior badyst at Moody's.
Tabares points out that during the During the emergency period, signed loans were disbursed, with Export Development Canada (EDC) an amount of US $ 300 million, the IDB disbursed for the Bello (Antioquia) treatment plant and CAF another for $ 100 million out of a total of $ 200 million. "After the incident, the rating agencies acted and that was a pretty obvious reaction. A delay of three years meant that they changed the projections and, already in their parameters, our level of debt exceeded a little the qualification that they had granted us, "admits Tabares.
Hidroituango is very important for Groupe EPM and for the production sector. "The project has almost allowed us to double the size of the generation, but only now, it will come three years later," reaffirms the vice president of corporate finance EPM.
Missing energy
shortage of energy that causes the timely entry of the hydroelectric project, the authorities gave a share of tranquility. "In the short term, the market has sufficient production capacity to meet the high demand scenario, even in El Niño scenarios," said Minister of Mines and Energy, Germán Arce. "The interconnected national system (NIS) would have the resources to meet the demand and could have constant thermal generation needs, at certain times, exceeding 70 GWh-day," says Jaime Alejandro Zapata Uribe, director of the National Dispatch Office Center. XM
The studies were conducted in the medium term, from two to three years, considering scenarios of low hydrology and non-registration of Hidroituango on the planned dates (the first unit in December 2018 and the fourth unit in August 2019). "In the long term (more than three years), in the face of critical hydrological scenarios, it can be seen that from 2022 there may be times when the reliability indicators established by the current regulations are not respected. or deficit periods "The director of the UPME, Ricardo Ramírez, pointed out that the CREG (Commission for Regulation of Energy and Gas) develops auctions of charges for reliability with incentives. early entry of projects. "A predictable impact is that the (electrical) matrix changes and there is a recomposition. Less electricity, more thermoelectric plants with coal and gas, and unconventional renewable sources, "he said.
Fitch agrees with market participants:" The system Colombian electricity will probably not experience a shortage of electricity until the end "
The agency warns that a significant drought caused by an El Niño phenomenon, which occurs on average every five years, "could pose a significant risk to the environment". He adds that "El Niño can significantly affect the hydrology of Colombia, resulting in drought conditions with a potentially negative impact on the effective availability of hydroelectric capacity". This situation will cause greater thermoelectric generation, affecting prices spot, that will 'shoot more, since the most expensive thermal badets are called for shipment'.
For its part, Zapata, of XM, argues that "with the delay of the entry into operation of Hidroituango will require a greater contribution by the park of the current generation and the vital importance to encourage the Input generation projects with construction and production times distributed in the NAS, as well as response mechanisms on demand. "
Arce, already in connection with the representatives of President-elect Iván Duque, reiterates that the risks begin to appear from 2022, but here it is essential how long it takes to regain control of the I & # 39; water in the Hidroituango project to integrate this energy into medium and long-term planning, which, for the moment, is not available and has no specific date. and when could this be ? "
To compensate for the delay, UPME has unconventional renewable projects on the radar for about 3,000 megawatts. "There are proposals for projects that exist in three regions of the country: Caesar, La Guajira and Magdalena with wind and solar.These are projects that have fast turnaround times but require an expansion of transmission system, which means that we can only rely on them in 2023, in the case of wind and solar by 2020, "says Ramírez.
taking into account growth trends demand and a lower than expected production capacity of the system, "a weak hydrology in 2020 and 2021 could lead to a further deterioration of the capital structure already under pressure from EPM. El Niño with an installed capacity of less than 3,500 MW instead of 5,900 MW, due to the delay of Ituango. "
Now, the energy volumes sold by EPM were below the total capacity of the project, "he was the one that we really considered firm and that we have gradually put on the market, "explains Tabares. "The energy of 2019 had been sold in a form called" pay for what was generated ": if EPM could not generate, we had no obligation to deliver that energy of 2019. In fact, these customers had already been notified and informed that because of the delay "
He insisted that another factor allowed EPM to be neutral:" Very quickly we went to get of energy on the market, where the supply is greater than the demand.We have had it, we have signed contracts and we bought the energy of 2020 and 2021 and we will be able to fulfill the contracts without economic prejudice for EPM, "says Tabares.
Analyst Fitch explains that EPM's business strategy was that 80% of Ituango's future sales had been placed on contracts, and that had an exposure of 5,000 gigawatts / hour. EPM went out to buy energy and provided 96% of their needs, due to the delay of Ituango. "EPM will not have a profit margin, as it would have been the case with Ituango," says Ugueto
. The Ituango delay would leave a tight energy gap between 800 and 1,200 MW, which could jeopardize the provision of electricity in the country in the medium term, warns the Colombian Association. energy production companies (Andeg). "It is very important that the government and the CREG, in the very short term, clarify the doubts that investors have presented to structure and value the projects that would participate in the auction of the expansion of reliability fees, which would be convened in the next few weeks, "said Alejandro Castañeda, director of the union.
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