Technical risk
The power plant uses a 155 MW Westinghouse 501F gas turbine. (The Westinghouse turbine
business is now part of Siemens.) At the end of 1996 there were 28 similar turbines in oper-
ation. In 1996, according to Westinghouse, average availability for its turbines installed in
1992 was 94 per cent, slightly above the 91 per cent availability in the project’s base-case sce-
nario. Westinghouse had four other turbines installed in Colombia.
Operating risk
As with any new project of this size and nature, operation of the facility could be affected by
many factors, including startup problems, equipment breakdowns, failure to operate at design
specifications, changes in law, failure to obtain necessary permits, terrorism, labour disputes
or catastrophic events such as fires, explosions, earthquakes or droughts.
The monthly capacity payments by Emcali are based on the facility’s available capaci-
ty and on an equivalent availability factor (EAF) that is equal to the facility’s available
capacity for any period divided by the facility’s capacity on the day that commercial opera-
tions begin.
If the EAF of the facility is less than 60 per cent in any month, capacity payments from
Emcali are reduced to zero. If the EAF is less than 60 per cent for any consecutive six-month
period, the PPA can be terminated. Emcali will not make capacity payments during most force
majeureevents that prevent the facility from operating.
Environmental and permit risk
TermoEmcali received the necessary permits from the Colombian government and was in
compliance with the World Bank environmental standards. Costs associated with future
changes in Colombian environmental and tax laws, as well as other changes in Colombian
law that affect the project’s net economic return, are passthroughs under the PPA.
Restructuring risk
In December 1996 the City Council of Cali adopted an agreement that required Emcali
to restructure its business by establishing separate power generation, power distribution,
water and sewage, and telephone subsidiaries under a holding company. To accommo-
date this reorganisation, Emcali signed an agreement with the senior secured lenders
that required each subsidiary to be jointly and individually liable for Emcali’s obliga-
tions under the PPA, and also provided a priority interest in a portion of its operating
revenues to the same extent as provided by Emcali before its restructuring. This agree-
ment was intended to prevent the restructuring from having a negative impact on
Emcali’s creditworthiness.
Exchange rate risk
Emcali’s PPA payments in Colombian pesos are indexed to US dollars, thereby mitigating the
lenders’ exchange rate risk.
TERMOEMCALI, COLOMBIA