The Colombian government has taken temporarily control of struggling electricity distribution company Electricaribe, which is 85.38% owned by Spanish energy utility Gas Natural Fenosa.
Tuesday’s move by the Superintendency of Residential Public Services, or SSP, Colombia's public utilities regulator, was aimed at ensuring continued electricity supplies in the seven provinces where the company operates, said the Colombian government.
The crisis at the company, which has 2.5 million customers in the Caribbean provinces of Atlántico, Bolívar, César, Cordoba, La Guajira, Magdalena and Sucre, has been building for the last several months, with customers complaining about frequent power outages.
Gas Natural says it wants a regulatory framework that provides more legal certainty
Gas Natural Fenosa has been accused of failing to invest in infrastructure and had stopped paying electricity suppliers. It said on Tuesday that the Colombian government stepped in due to a cash crunch at Electricaribe caused by a high number of unpaid bills and widespread consumer fraud. It says the company has accumulated unpaid bills of €1.26 billion from some 1.5 million of its customers.
Gas Natural Fenosa said the intervention would not affect the group’s accounts and that it remained fully committed to working together with the Colombian authorities to seek a negotiated solution.
It added that the government intervention would shield the power distributor from its temporary liquidity problems and ensure its viability and normal operations while the company continues to seek a solution that is beneficial to all.
Gas Natural Fenosa began pursuing a negotiated solution to Electricaribe’s crisis this summer within the framework of the Spanish-Colombian bilateral agreement for the promotion and reciprocal protection of investments.
The crisis at Electricaribe has been building for several months
Those talks with the Colombian government will continue despite Tuesday’s temporary takeover, Gas Natural Fenosa said.
Isidro Fainé and Rafael Villaseca, Gas Natural’s president and CEO respectively, travelled to Colombia over the weekend to negotiate a solution with the Colombian government.
The Colombian authorities say they have taken over the company for two months, a period that can be extended, while a decision is made on its future.
Immediately after the takeover, Colombia’s President Juan Manuel Santos tweeted: “Takeover of Electricaribe, the best outcome to put the company in order and guarantee service.”
Gas Natural says it wants a regulatory framework that provides more legal certainty for recovering the debts and says that future investment in the Colombian operation depends on agreement being reached.
“The solution is for there to be a reasonable regulatory framework that allows us to reduce arrears and fraud to reasonable levels and allows the company to invest in growth,” said Villaseca earlier this month.
Electricaribe made a loss of €24 million in the first nine months of 2016, compared with a net profit of €14 million a year earlier.
Fenosa bought Electricaribe in 2000 following its privatization in 1998. In 2009, Gas Natural and Fenosa merged in 2009.
English version by Nick Lyne.