ISAGEN S.A. E.S.P.’s (ISAGEN) ratings reflect the company’s solid
Security Current Previous
market share position, its sound commercial strategy and its somewhat
diversified portfolio of electricity generation assets located throughout
Colombia. ISAGEN’s credit metrics are considered adequate for the
FC – Foreign currency. LC – Local currency. IDR – Issuer default rating. NR – Not rated.
rating category and supportive of the company’s credit quality. The
ratings also reflect the company’s exposure to regulatory risk and the
Rating Watch. None
competitiveness of the Colombian electricity industry.
Rating Outlook. Stable Rating Outlook.Positive*
ISAGEN’s competitive position within the country is bolstered by its
significant market share position and its somewhat balanced portfolio of generation assets. ISAGEN ranks third as the largest electricity
generation company based on installed capacity with 16% of the
+1 312 368-3260 lucas.aristizabal@fitchratings.com
market after Emgesa S.A. E.S.P. (EMGESA) and Empresas Públicas
de Medellín E.S.P. (EPM). This solidifies ISAGEN’s prospects for
growth both inside Colombia and abroad. Furthermore, ISAGEN’s
somewhat balanced installed capacity (86% hydro and 14% thermo)
mitigates to some extent the company’s exposure to hydrology risk.
The Colombian electricity sector, including ISAGEN, is affected the
most by droughts created by the El Niño weather phenomenon, and it
may experience profitability margin compression during low
ISAGEN is a state-controlled electricity generation company and an energy solution
The company’s commercial strategy is solid and supportive of its
credit profile. Although, the bulk of the company’s revenue comes
installed capacity, the company is the third-
from selling electric energy, ISAGEN’s commercial strategy is to
largest electricity generator in Colombia and
diversify its revenue by selling gas and providing energy solutions to
generated, on average, 8,443 GWh during large customers. Additionally, the company’s revenues are considered
2006. ISAGEN has a market share of 16.12%
predictable, to some extent, as its strategy is to contract a significant
based on electricity generation and 15.8% based on installed capacity. The government
portion of its electricity production in the short to medium term.
is in the process of selling 19.22% of the
Currently, the company has contracted with market participants and
company’s total equity. ISAGEN also large customers for approximately 80% of its electricity generation for commercializes gas and provides energy the next three years. solutions to large customers.
ISAGEN’s financial profile is considered adequate for the rating category with strong debt-service coverage and moderate leverage. Its
recently refinanced debt profile provides the company with a fair debt
amortization schedule while minimizing short- to medium-term
refinancing risk. ISAGEN’s leverage has declined significantly during
the past five years. Going forward, the company is expected to
generate sufficient cash flow to cover its capital-expenditure program and service debt.
Although the regulatory framework is believed to be supportive of
sector participants, recently implemented changes are yet to be proven.
Capacity reliability charges replaced capacity payments at the end of
2006. Reliability charges revenue and capacity payments are in
Government promotional vehicle for capacity expansion projects.
essence similar. They differ in that the former is
company’s total equity to the general public as part of
driven by the new power plants to be constructed and
the government democratization process (Proceso de
the latter was based on comparable efficient
thermoelectric generation plants outside the country. ISAGEN is schedule to receive US$86 million on
reliability charges revenue during 2007.
ISAGEN’s business strategy is to sell energy solutions and high value-added products. The
company offers a combination of different energy
ISAGEN is a public service company that focuses on
sources to large customers to diversify its revenue
electricity generation and the commercialization of
source and decrease its exposure to regulated
energy solutions. ISAGEN was spun off from
markets. In addition, the company is in the process of
Interconexion Electrica S.A. (ISA) in 1995, when the
an initial public offering (IPO) that will let ISAGEN
Colombian electricity industry was opened to
run more independently from the central government.
Furthermore, the company has implemented a
ISAGEN has 2,132 MW of installed capacity, with
commercialization strategy by contracting its
86% coming from hydro- and 14% from thermo
electricity production in the midterm in order to have
electric generation. In addition, the company has 150-
a more stable revenue source. ISAGEN has
MW interconnection with Venezuela. The company
contracted approximately 80% of expected electricity
accounted for approximately 16% of Colombia’s
generation during the next three years. Going
total installed capacity and generated, on average,
forward, the company plans to continue with this
strategy for as long as the market allows.
In addition to generating electricity, ISAGEN offers
ISAGEN has also tried to balance the sales mix
comprehensive energy solutions to large customers
between regulated and nonregulated business.
that demand other sources of energy beyond
Contracted sales to nonregulated businesses went
electricity. The company commercializes gas
from 26% of total sales in 2002 to 35% in 2006,
purchased by or left over from its thermo generation
illustrating the company’s success in implementing
unit, Termocentro, which has a take-or-pay contract
with ECOPETROL S.A. for 48,000 million British thermal units per day (MBTUD). Furthermore, the
ISAGEN’s growth strategy for the 2006–2010 period
company has created a network of businesses that
incorporates projects that are mostly aimed at
provide all types of services related to the industry.
increasing water inflows to existing plants. This
Although these businesses provide some amount of
would maximize energy generation with minimal
revenue diversification, the bulk of its revenue comes
cost. The company is projecting to invest
from generating and commercializing electricity.
approximately US$170 million during this period and expects to increase average energy generation by
Currently, the company’s main shareholders are the
1,338 GWh. Among the company’s projects, the
Colombian government and other publicly and
most significant is a new hydroelectric generation
privately owned electricity companies. The
facility, located in the Amoyá River that is expected
government is in the process of selling 19.22 % of the
to have 80 MW of installed capacity and generate
Pro Forma Ownership Structure Post IPO Financiera Empresas de Empresas de Empresas Colombian Energética Públicas de General Public Minoritarios Nacional S.A. de Bogotá S.A. del Pacifico S.A. Medellin E.S.P. E.S.P 2.52% E.S.P. 5.04% ISAGEN S.A.
IPO – Initial public offering. Source: ISAGEN S.A. E.S.P. Sales Proceeds Installed Capacity
approximately 510 GWh, on average. Construction is
The San Carlos plant’s first phase entered
expected to begin in July 2007, and the plant should
commercial operation in 1984, and the second phase
reach commercial operations during 2010.
began in 1987. It is composed of eight 155-MW units. The plant’s historical availability has been in
excess of 90%, with the exception of 2001 and 2006,
Although operating in a competitive market,
when the plant had a major unscheduled outage due
ISAGEN benefits from low-cost and somewhat
to a short circuit in one of the units. All corrective
balance electricity generation assets located
actions have been taken, and the plant was fully
throughout Colombia. ISAGEN’s installed capacity,
functional once again on March 17, 2007.
plus the capacity provided from the interconnection
Notwithstanding the 2006 unscheduled outage, the
with Venezuela, positions the company as the third-
San Carlos plant’s average generation during 2006
largest generation company in the country after
did not decrease significantly, declining by only 135
Emgesa and Empresas Públicas de Medellín E.S.P.
GWh year over year to 5,930 GWh from 6,065 GWh
ISAGEN has five generation plants, of which four are
Miel I is ISAGEN’s second-largest generation unit,
hydro and one is thermoelectric. Three of its
with 396 MW of installed hydroelectric generation
hydroelectric generation plants are located in the state
capacity. This plant is located in a different
of Antioquia’s hydrology system, which is the largest
hydrology system than the San Carlos plant, which
hydrology system in the country and where two other
provides the company some diversification to
hydrology risk. Miel I reached commercial operation in December 2002, and it generated 1,492 GWh, on
ISAGEN’s main unit is La Central Hidroelectrica de
San Carlos (San Carlos), a 1,240-MW installed capacity hydroelectric generation plant. The San
The other two hydroelectric generation plants owned
Carlos plant is the largest of its kind in the country. It
by ISAGEN are Jaguas and Calderas, with an
is located at the end of the previously mentioned
Antioquia hydrology system, providing the company
respectively. Jaguas reached commercial operation in
with a stable water inflow from other generation units
1998 and Calderas was brought back to operations in
in addition to the water intake for the San Carlos
2006 after being decommissioned in 1998. Jaguas
and Calderas generated, on average, 716 GWh and 49G GWh, respectively, during 2006.
Gas (CREG) mandates international interconnection
to pay transmission charges as any generation plant
Installed
within the country. This elevates the electricity price
Generator Capacity (MW)
under this contract, placing this energy source out of
Colombian per-capita electricity consumption levels
are below those of other Latin American countries.
This creates a positive expectation in demand growth,
which is characterized by being closely linked to the
country’s gross domestic product (GDP). Colombian
per-capita electricity consumption is approximately 1 MW per year, while the per-capita consumption of
Termocentro, ISAGEN’s sole thermoelectric
countries such as Chile and Argentina is close to
generation plant, is a gas-fueled, combined-cycle
plant with an installed capacity of 300 MW. The plant started commercial operations in 2000 and
Colombia has approximately 13,500 MW of installed
generated 229 GWh during 2006. The company
capacity, of which 67% comes from hydroelectric
benefits from Termocentro as it helps to mitigate the
plants and 33% from thermoelectric plants. The
business exposure to hydrology risk. Furthermore,
Colombian generation capacity mix has significantly
this plant is of extreme importance for the company,
improved since the country’s suffered a major
as it is expected to generate approximately
electricity crisis during 1992 and 1993. This crisis
US$27 million out of the US$86 million in capacity
stemmed from the system’s high dependency on
reliability charges revenue expected to be paid to
hydroelectric generation capacity. At the time of the
crisis, approximately 80% of installed capacity was hydroelctric, significantly exposing the country to
In addition to its own plants, ISAGEN has the
droughts. Market participants project that current
exclusive right to use an interconnection line of 150
capacity is enough to meet future demand until 2012.
MW with Venezuela. Electricity under this contract is seldom dispatched into the Colombian spot market, given that the Comisión de Regulación de Energía y
Colombian Demenad Versus Supply
M W – M egawatt. So urce: ISA GEN S.A . E.S.P . Amortization Schedule Leverage
EB ITDA – Operating inco me plus depreciatio n and amo rtizatio n.
COP - Co lo mbian peso . So urce: ISA GEN S.A . E.S.P .
As a result of the 1992 and 1993 electricity crisis, the
revenue. This new reliability charges scheme mainly
Colombian government implemented the domestic
seeks to promote investment in new generation.
public service law (Ley 142) and the electricity law (Ley 143) of 1994. These laws gave CREG
Reliability charges are defined, under Resolution 071
regulatory power over the industry. Furthermore, the
of 2006, as payments made to a generation company
government incentivized private investment in
for making its firm capacity available to the system.
thermoelectric generation projects to reduce the
After a five-year transitioning period, new generation
country’s high exposure to hydrology risks.
companies will offer to the system their firm capacity under an anonymous biding process, thus setting the
price per KWh (in $/KWh) for existing generation
The recently revised Colombian regulatory
companies for the subsequent year. New generation
framework seems supportive of sector participants
companies will receive reliability charges revenue for
and financial stability; however, it is yet to be proven.
the period determined under the bidding process.
During the past year, the Colombian regulatory
(i.e., the new plans will set their long-term reliability
framework underwent additional fundamental
revenue for up to 20 years). The first bidding process
changes. The most significant change in the sector
of this kind is scheduled to take place during May
regarding electricity generation companies was the
2008 for the period of Dec. 1, 2012, through Nov. 30,
redefinition of capacity payments as reliability
2013. During the transitioning period, CREG has set
charges revenue or cargos por confiabilidad.
reliability charges at approximately US$13/MWh and linked them to U.S. inflation. ISAGEN will generate,
In 1996, CREG implemented capacity payments to
as previously mentioned, US$86 million of reliability
generators. These payments seek to guarantee
efficient availability of electricity supply by paying generation companies for their installed capacity.
Firm capacity (energía firme para el cargo por
This scheme was designed to be in place for 10 years,
confiabilidad [ENFICC]), is defined under
expiring on Nov. 30, 2006. During 2006, CREG
Resolution CREG-071 of 2006 as the maximum
published a new methodology to compensate
electricity a certain plant is able to generate
generators for their installed capacity under
continuously, under low hydrology conditions, during
Resolution CREG-071 of 2006, which was later
one year. Generation companies have the option, and
modified by Resolution CREG 079 of 2006. These
not the obligation, to make their plants available to
resolutions establish the new reliability charges
receive payments for reliability charges.
Generation plants receiving revenue for reliability
company should be able to comfortably cover 2007
charges will deliver the energy related to their
debt service with internally generated cash flows.
capacity when the country faces supply shortages.
ISAGEN’s free cash flow generation has averaged
Supply shortages occur when the spot price surpasses
approximately US$70 million during the past five years.
a cap called the shortage price or precio de escasez. This cap price is set by CREG monthly and is the
ISAGEN’s capital-expenditure program for the next
price at which energy related to capacity receiving
three years is considered moderate compared with its
reliability charges will be paid. Furthermore,
cash flow generation ability. ISAGEN’s cash flow
thermoelectric generation plants that receive revenue
from operations (CFO) and funds from operations
for reliability charges must have fuel supply contracts
(FFO) of US$136 million and US$130 million,
in order to guarantee their availability.
respectively, generated during 2006 create a positive precedent for the company’s ability to meet its capital
The company’s financial profile is considered to be adequate for the rating category and has significantly
ISAGEN’s debt is mainly composed of two tranches.
improved during the past four years. ISAGEN has
Tranche A is for US$212 million, with a five-year,
significantly deleveraged its balance sheet during the
interest-only grace period and a 15-year semiannual
past five years by collecting and refinancing debt. In
amortization thereafter. This tranche has a sovereign
addition, ISAGEN benefited from the peso
guarantee and is insured by OPIC. Tranche B is a
appreciation. Cash flow generation also improved
simple bank facility for US$38 million with a five-
considerably during the past five years.
year amortization schedule. These two tranches make up 95% of the company’s total debt.
Short- to medium-term liquidity is not a major concern for the company. During 2007, ISAGEN faces debt amortizations of approximately US$31 million. The
Financial Summary — ISAGEN S.A. E.S.P. (US$ Mil., Years End Dec. 31)
Operating EBITDAR/(Interest Expense + Rental Expenses)
(FCF + Cash and Marketable Securities)/Debt-Service Coverage
Cash Flow from Operations/Capital Expenditures
Total Debt with Equity Credit/Operating EBITDA
Total Net Debt with Equity Credit/Operating EBITDA
Total Adjusted Net Debt/Operating EBITDAR
Total Nonoperating/Nonrecurring Cash Flow
EBITDA –Operating income plus depreciation and amortization. EBITDAR – Operating income plus depreciation, amortization and rents. FFO – Funds from operations. FCF – Free cash flow. EBIT – Operating income. Note: Numbers may not add due to rounding.
Copyright 2007 by Fitch, Inc., Fitch Ratings Ltd. and its subsidiaries. One State Street Plaza, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. All of the information contained herein is based on information obtained from issuers, other obligors, underwriters, and other sources which Fitch believes to be reliable. Fitch does not audit or verify the truth or accuracy of any such information. As a result, the information in this report is provided “as is” without any representation or warranty of any kind. A Fitch rating is an opinion as to the creditworthiness of a security. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed, suspended, or withdrawn at anytime for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from USD1,000 to USD750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from USD10,000 to USD1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of Great Britain, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers.
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LEGIONNAIRES' DISEASE ALERT Information for GPs, respiratory & ID physicians & EDs Please distribute to all clinicians in your practice Key points Visitors to Sydney Olympic Park in August may be at risk of Legionnaires’ disease Consider Legionnaires' disease in people presenting with pneumonia If the diagnosis is suspected, collect urine for Legione
ISAGEN S.A. E.S.P.’s (ISAGEN) ratings reflect the company’s solid
Security Current 
essence similar. They differ in that the former is
company’s total equity to the general public as part of
driven by the new power plants to be constructed and
the government democratization process (Proceso de
the latter was based on comparable efficient
thermoelectric generation plants outside the country. ISAGEN is schedule to receive US$86 million on
reliability charges revenue during 2007.
ISAGEN’s business strategy is to sell energy solutions and high value-added products. The
company offers a combination of different energy
ISAGEN is a public service company that focuses on
sources to large customers to diversify its revenue
electricity generation and the commercialization of
source and decrease its exposure to regulated
energy solutions. ISAGEN was spun off from
markets. In addition, the company is in the process of
Interconexion Electrica S.A. (ISA) in 1995, when the
an initial public offering (IPO) that will let ISAGEN
Colombian electricity industry was opened to
run more independently from the central government.
Furthermore, the company has implemented a
ISAGEN has 2,132 MW of installed capacity, with
commercialization strategy by contracting its
86% coming from hydro- and 14% from thermo
electricity production in the midterm in order to have
electric generation. In addition, the company has 150-
a more stable revenue source. ISAGEN has
MW interconnection with Venezuela. The company
contracted approximately 80% of expected electricity
accounted for approximately 16% of Colombia’s
generation during the next three years. Going
total installed capacity and generated, on average,
forward, the company plans to continue with this
strategy for as long as the market allows.
In addition to generating electricity, ISAGEN offers
ISAGEN has also tried to balance the sales mix
comprehensive energy solutions to large customers
between regulated and nonregulated business.
that demand other sources of energy beyond
Contracted sales to nonregulated businesses went
electricity. The company commercializes gas
from 26% of total sales in 2002 to 35% in 2006,
purchased by or left over from its thermo generation
illustrating the company’s success in implementing
unit, Termocentro, which has a take-or-pay contract
with ECOPETROL S.A. for 48,000 million British thermal units per day (MBTUD). Furthermore, the
ISAGEN’s growth strategy for the 2006–2010 period
company has created a network of businesses that
incorporates projects that are mostly aimed at
provide all types of services related to the industry.
increasing water inflows to existing plants. This
Although these businesses provide some amount of
would maximize energy generation with minimal
revenue diversification, the bulk of its revenue comes
cost. The company is projecting to invest
from generating and commercializing electricity.
approximately US$170 million during this period and expects to increase average energy generation by
Currently, the company’s main shareholders are the
1,338 GWh. Among the company’s projects, the
Colombian government and other publicly and
most significant is a new hydroelectric generation
privately owned electricity companies. The
facility, located in the Amoyá River that is expected
government is in the process of selling 19.22 % of the
to have 80 MW of installed capacity and generate
Pro Forma Ownership Structure Post IPO
Sales Proceeds
Gas (CREG) mandates international interconnection
to pay transmission charges as any generation plant
Installed
Amortization Schedule 
Generation plants receiving revenue for reliability
company should be able to comfortably cover 2007
charges will deliver the energy related to their
debt service with internally generated cash flows.
capacity when the country faces supply shortages.
ISAGEN’s free cash flow generation has averaged
Supply shortages occur when the spot price surpasses
approximately US$70 million during the past five years.
a cap called the shortage price or precio de escasez. This cap price is set by CREG monthly and is the
ISAGEN’s capital-expenditure program for the next
price at which energy related to capacity receiving
three years is considered moderate compared with its
reliability charges will be paid. Furthermore,
cash flow generation ability. ISAGEN’s cash flow
thermoelectric generation plants that receive revenue
from operations (CFO) and funds from operations
for reliability charges must have fuel supply contracts
(FFO) of US$136 million and US$130 million,
in order to guarantee their availability.
respectively, generated during 2006 create a positive precedent for the company’s ability to meet its capital
The company’s financial profile is considered to be adequate for the rating category and has significantly
ISAGEN’s debt is mainly composed of two tranches.
improved during the past four years. ISAGEN has
Tranche A is for US$212 million, with a five-year,
significantly deleveraged its balance sheet during the
interest-only grace period and a 15-year semiannual
past five years by collecting and refinancing debt. In
amortization thereafter. This tranche has a sovereign
addition, ISAGEN benefited from the peso
guarantee and is insured by OPIC. Tranche B is a
appreciation. Cash flow generation also improved
simple bank facility for US$38 million with a five-
considerably during the past five years.
year amortization schedule. These two tranches make up 95% of the company’s total debt.
Short- to medium-term liquidity is not a major concern for the company. During 2007, ISAGEN faces debt amortizations of approximately US$31 million. The
Financial Summary — ISAGEN S.A. E.S.P. (US$ Mil., Years End Dec. 31)
Operating EBITDAR/(Interest Expense + Rental Expenses)
(FCF + Cash and Marketable Securities)/Debt-Service Coverage
Cash Flow from Operations/Capital Expenditures
Total Debt with Equity Credit/Operating EBITDA
Total Net Debt with Equity Credit/Operating EBITDA
Total Adjusted Net Debt/Operating EBITDAR
Total Nonoperating/Nonrecurring Cash Flow
EBITDA –Operating income plus depreciation and amortization. EBITDAR – Operating income plus depreciation, amortization and rents. FFO – Funds from operations. FCF – Free cash flow. EBIT – Operating income. Note: Numbers may not add due to rounding.
Copyright 2007 by Fitch, Inc., Fitch Ratings Ltd. and its subsidiaries. One State Street Plaza, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. All of the information contained herein is based on information obtained from issuers, other obligors, underwriters, and other sources which Fitch believes to be reliable. Fitch does not audit or verify the truth or accuracy of any such information. As a result, the information in this report is provided “as is” without any representation or warranty of any kind. A Fitch rating is an opinion as to the creditworthiness of a security. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed, suspended, or withdrawn at anytime for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from USD1,000 to USD750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from USD10,000 to USD1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of Great Britain, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers.