On Tuesday, the Colombian government ordered an intervention in Electricaribe because there was a risk the company could discontinue its services. Electricaribe is an electricity distributor with 2.5 million clients on Colombia’s Caribbean Coast. Gas Natural owns 85%, while the remaining stake is in state hands.
The Colombian subsidiary had accumulated defaults worth multi- millions of euros, after years of supplying electricity to clients who didn’t pay their bills.
Electricaribe was threatening not to pay the power generation companies, which would have caused blackouts. Gas Natural refused to inject eight million euros a week to provide a lifeline for Electricaribe and the government is demanding more investment. Gas Natural sees the government’s intervention in its Colombian subsidiary as a temporary preventitive measure. And it has flagged it does not expect this to have any significant impact on EBITDA, attributable net profit or cash flow.
Gas Natural intensified talks with the Colombian government last October with the aim of reaching an agreement. Finally the government decided to take control of Electricaribe. There is no definitive time-table for the intervention. The outstanding bills accumulated by Electricaribe stand at 1.260 billion euros, with provisions already made for 83% of this total. In the nine months to September, the company posted 14 million euros of losses compared to profits of 24 million a year earlier, so its situation was deteriorating.
This measure will put an end to the continued withdrawal of funds provoked by Electricaribe’s difficult situation. On the other hand, the intervention will mean a slump for Gas Natural’s business in Colombia, which it considers a strategic market. Electricaribe’s book value is 580 million euros. So a hypothetical expropriation of the company could have a negative impact on Gas Natural’s shareholder funds (14.5 billion euros at end-September 2016).