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In Full: Power market faces double hit from Colombian plants

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  • Topics:
    • Claims & Losses
    • Onshore Energy
    • Property - International

The power and utilities (re)insurance markets are bracing themselves following two major incidents at Colombian power plants that are threatening the country's supply of electricity, sister publication Inside FAC revealed on 7 March...

 

 

The incidents could become two of the sector's biggest claims of 2016.

 

On 29 February, Medellín-based generation and distribution firm Celsia reported a damaged turbine at its 610 megawatt (MW) Termoflores plant in Barranquilla.

 

Celsia, part of Grupo Argos, has installed generation capacity of 2,332MW spread across 26 power plants located in Colombia, Panama and Costa Rica. The company has a Colombian market share of 50.01 percent.

 

The Barranquilla plant is only partially operational, with 380MW of capacity, and is expected to come back online in three to four weeks, according to the company.

 

However, the potential market loss from the Termoflores plant is expected to be dwarfed by claims stemming from a fire at Empresas Públicas de Medellín (EPM)'s 560MW Guatapé hydroelectric plant in mid-February. The incident is also understood to have affected other nearby hydroelectric plants.

 

The severity of the damage caused by the fire is that such that the Guatapé plant is expected to have operational capacity severely curtailed for several months, with full production not expected to resume until September 2016, according to EPM.

 

EPM is the second largest business group in Colombia and has a captive reinsurer, Maxseguros, which was founded in Bermuda in 2008 and trades as EEPPM Re.

 

However, it is understood that EPM reinsures the captive into the London market. Writers in the power market are therefore expecting to absorb a hit that could easily run into the hundreds of millions of dollars, given the potential business interruption (BI) portion of the claim.

 

The BI element of power and energy losses has been the bane of the fac market for some years now, with the physical damage property component of recent major claims often paling by comparison.

 

One senior energy broker told Inside FAC that assessments of quantum were hard to come by at this early stage, though there was no doubt the claim would be "significant".

 

 

 

 

It is also expected to dwarf other recent power losses in the Latin American market, including the $70mn hit from fatigue at a Chilean hydroelectric plant in 2014, and the $40mn loss caused by a fire at a Venezuelan substation in the same year.

 

EPM first built a large hydroelectric complex at the site in the 1970s with the construction of a dam, and since then Guatapé has become one of the most important electricity production centres in the country.

 

Indeed, such is the importance of the site to Colombia's electricity generation capability that XM, a subsidiary of state-run transmission firm Isa, has warned of a heightened blackout risk for the country if measures to save electricity consumption are not taken.

 

Hydroelectric plants currently supply around 50 percent of electricity to Colombia's grid, according to XM. The balance comes mostly from Colombia's 4.4 gigawatt (GW) thermal fleet.

 

The country's total installed generating capacity is 15.9GW. National demand in January 2016 was 10.2GW, according to national energy and mining planning unit Upme.

 

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