Project economics
Colombia’s power industry
Before the TermoEmcali project was completed Colombia had 10,500 MW of installed
power-generating capacity, of which 75 per cent was hydroelectric and 25 per cent was ther-
mal. Heavy dependence on hydroelectric power led to unreliable service and sharp swings in
electricity prices. Frequent brownouts and blackouts encouraged the development of a fossil-
fuel generation plan to take advantage of Colombia’s abundant natural gas resources. The cor-
nerstone of this plan has been the construction of a pipeline system to bring gas to the larger
cities. Gas-fired power plants such as TermoEmcali provide anchor demand for the pipelines.
Project’s importance to Emcali
When completed TermoEmcali was expected to account for 25 per cent of Emcali’s expect-
ed customer load. The estimated project price averaged 4.6 cents (US) per kilowatt hour
(kWh), compared to Emcali’s average cost of five cents per kWh in 1996. It therefore repre-
sents lower costs to Emcali. The project was meant to establish a degree of certainty in
Emcali’s power costs, which in the past had been subject to change with each new two-year
contract. As a result Emcali expected to be able to offer long-term contracts to its customers.
Ownership and contractual relationships
InterGen
InterGen was formed in 1995 by subsidiaries of Bechtel Enterprises and Pacific Gas &
Electric (PG&E) to develop, own, and operate power projects outside the United States. In
1996, because of a change in business strategy, PG&E sold its interest to Bechtel. Bechtel
later sold an interest in InterGen to Shell Generating Company.
InterGen’s primary business is to develop power plants overseas. InterGen won the pro-
ject in a competitive bidding process. It is responsible for development, operation and financ-
ing of the project. In 1996 InterGen arranged for the financing of more greenfield power plants,
measured in total megawatts, than any other developer. Other InterGen-financed projects
include: in 1996, the 690 MW Samalayuca II plant in Mexico, the 725 MW Rocksavage plant
in the United Kingdom and the 440 MW Quezon plant in the Philippines; in 1997, Mayakan
in Mexico; and in 1998, Meizhou Wan in China and Coryton in the United Kingdom.
Emcali
Emcali, with a 43 per cent interest in the project, is the third largest utility in Colombia.
Established in 1955, it is municipally owned. Emcali is the exclusive distributor of electricity,
and the exclusive provider of water, sewer and telephone services to the city of Cali. Before
the TermoEmcali project was completed Emcali had no electric generating facilities. As of the
end of 1996 Emcali had a ‘BBB+’ local and a ‘BBB-’ international credit rating from Standard
& Poor’s, and ‘BBB’ local and international ratings from Duff & Phelps (now Fitch).
In 1996 electricity distribution accounted for 58 per cent of Emcali’s revenues. Of total
electricity sales in 1996, 32 per cent were to industrial customers, 31 per cent to residential
customers, 22 per cent to commercial customers and 15 per cent to other customers. The total
POWER PLANT