Colombia Problems Grow for Spain's Gas Natural

Spanish utility Gas Natural (GN) has called on the Colombian government to quash a March 14 ruling by its utilities regulator to liquidate GN’s 85.38%-owned electricity distribution subsidiary Electricaribe, with little likelihood of any compensation for GN.

Electricaribe "is not able to provide the service of energy with the quality and continuity due,” said the regulator Colombia’s Superintendency of Public Utilities (abbreviated in Spanish to: Superservicios). It has begun the process of finding a new operator for the business, including a temporary agent to provide immediate services to its customers.

GN responded that the decision was “contrary to the spirit of the deepening of trade relations between the EU and Colombia under their free trade agreement” and would damage investment in the country. It reaffirmed its willingness to maintain an open dialogue with the Colombian government, but acknowledged that Electricaribe had suffered from “chronic situation of fraud and non-payments for many years totaling €1.3bn”, of which more than €200mn in 2016 alone, arguing that “the solution requires the establishment of a secure and reasonable legal framework.”

Electricaribe distributes power to 2.5mn customers in coastal Colombia, but is also a power and gas supplier (Photo credit: Electricaribe)

GN said: “Electricaribe’s investment between 2011 and 2015 amounted to €255mn, which could have been three times greater if it had been able to count on government measures to address the serious problem of fraud and non-payment noted above."

Nonetheless GN will be asked by its own investors why it allowed such a large debt to build up over such a long time, and why disclosure to markets of the size of the problem occurred only in November 2016. At its 2016 results, GN last month downplayed the repercussions of Colombia debts by deconsolidating Electricaribe, thereby actually reducing GN’s group net debt. Reports indicated that GN might refer Colombia to international arbitration. 

Two months ago Spanish gas grid Enagas was told by the Peruvian government that a gas pipeline concession, in which it has a stake, had been terminated. Enagas too has warned it may seek an arbitration referral against Peru, if compensation is not provided.

Mark Smedley