It adds that the lack of an independent regulatory framework with a rate setting process that does not follow technical considerations to remunerate capital investment, AOM expenditure and a reasonable return on capital could undermine investor confidence and prevent the necessary expansion of the system in could endanger. but also the quality of the service.
Fitch predicts that electricity demand in Colombia will grow by 1,500 GWh (about 2%), on top of last year’s growth of 2,500 GWh.
This implies that 1 GW of additional capacity is required annually to meet demand growth without additional pressure on energy prices, which would require generation from non-conventional renewable sources with capacity factors ranging from 20% to 25%.
In 2022, 25 projects with a net effective capacity of 995 MW came into commercial operation, of which 580 MW corresponded to the first two units of the Ituango project at the end of last year.
“Reduced investment in required transmission and distribution projects could affect the stability and reliability of the electrical system and increase rates given the risk of higher power losses and curtailment costs, especially in the coastal area. These pressures could be exacerbated by an El Niño weather event, which would require existing gas-fired power plants to ship at higher marginal costs,” the report states.
It argues that the Colombian regulator’s independence from national government interventions has been a key factor supporting the strong credit profiles of rated utilities.
For the rating agency, Colombia’s strong regulatory structure has generally been positive for the credit profiles of rated issuers, balancing end-user interests with utility returns, despite the occasional slowdown in the rating cycle of rates.
The regulatory framework has ensured stable and predictable cash flows for market participants, improving access to capital, enabling greater coverage and better quality of service.
Most Colombian utilities have strong credit profiles consistent with low investment grade ratings and stable rating outlook.
However, a material structural change in electricity regulation due to political interference remains a concern for electricity generation, distribution and transmission companies, and indirectly for natural gas and water distribution companies, which represent 55% of the portfolio of non-financial companies assessed by Fitch in Colombia.
Source: El heraldo
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
