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Colombia 2016 | ENERGY & MINING | INTERVIEW

TBY talks to Federico Echavarria, Country Manager of AES Chivor, on diversification, the effects of El Niño, and the legal framework in Colombia.

 Federico Echavarria
BIOGRAPHY
Federico Echavarria has been the General Manager of AES Chivor in Colombia since February 2009. Prior, he was the Vice President for North America Business Development. In 2007, he was the Vice President of North America Central, responsible for overseeing the operation of the AES Plants in Oklahoma, Texas, and Mexico. He has also previously served as General Manager of Merilectrica, a local thermal generator, and the Head of Investment Banking at Corfinsura (now Bancolombia), a local private financial institution. He is an industrial engineer and obtained his undergraduate degree from Universidad de Los Andes and holds an MBA from Harvard Business School.

How does the lack of water affect consumers in Colombia?

Fortunately, some proactive distribution companies signed contracts five years ago with fixed prices. The contracts market ultimately affects the end consumer, and because distribution companies signed contracts well in advance there has been a minimal impact on citizens, even though there was a significant increase in prices on the spot market. There are some companies that have more exposure to the spot market and it could have some impact; however, the structure of this sector puts a ceiling on the impact so that they are protected.

How will El Niño affect your operations in 2016?

We are prepared, and it is part of our risk management policy. We need to ensure that we have enough water in our reservoir to get through the end of El Niño. We have certain obligations with the market, and we have the capacity and the water storage needed to make sure that we are able to comply with all of our obligations beyond El Niño. We are already used to this effect because it happens every four to five years. We endured extensive rationing in 1992 and 1993, and we structured the sector to prepare the country for this type of event.

What stands out about the Tunjita plant, which will become operational later this year?

Tunjita is unique because it takes advantage of existing infrastructure and the water resources of Chivor, so we are able to produce additional energy. The project is in its final stage of construction and we expect to complete it by the middle of 2016 and start producing in the second half of the year. Construction has taken about four years because we need to make sure that the impact of the current operation at Chivor is at a minimum.

Is Chivor planning to diversify and invest in other kinds of energies?

AES in general is very enthusiastic about diversifying its energy portfolio. Currently we are leaders in energy storage, which is a key component for the development of non-conventional renewable energy. We hope that we can make new investments in Colombia in energy storage. The country is also promoting wind and solar energy through changing regulations, which will create opportunities that we can develop in the future.

How attractive is the current legal framework for foreign investors to invest in the energy sector?

One of the advantages of Colombia is that it has a strong commitment to private investment and welcomes foreign investors who can compete under the same conditions as the local competitors.

What are your views on the privatization of Isagen for the sector?

The government investment in Isagen was reaching a mature stage, to the point where there was no significant difference between the role of the government and the role of the private enterprise, so the government decided the money could be better invested in other sectors of the economy, particularly in much-needed infrastructure. That was the reason why the government privatized Isagen, which was very successful, and it was able to sell it to a well-known international company that will bring its know-how while respecting the skills and knowledge of the local people. This is an excellent demonstration of Colombia's openness to foreign investments and both local and international companies.