The Codensa Case: Electricity and Related Services for the BOP in Colombia

Manuel Bueno — Fri, 07 Dec 2007 08:27:30 -0500

Codensa is a very successful utility company that serves 2.2 million customers in Colombia. It is controlled by Endesa, the largest electric utility company in Spain, which in 1997 took control of Codensa and Emgesa (this second company accounts for 21% of the generated electric capacity in Colombia).

Its return over equity (that is, the rate of return over shareholders’ investments) has grown from 4% in 2003 to nearly 12% in 2006. This is a measure of the current company's profitability.

Furthermore, last July, Codensa’s debt offer was oversubscribed three times, despite being in Colombian pesos rather than a more stable international currency and despite the jittery markets at the time (they still are). This was a bet the market made in favor of Codensa’s future stability and profitability.

Codensa caters to the Colombian BOP. According to their 2006 Annual Report (in Spanish), more than 88% of their customers were households of which more than 80% belong to the socioeconomic population strata 1, 2 and 3. In value terms, households represent nearly 60% of total sales out of which 74% belong to the above mentioned strata. In both these cases, strata 2 and 3 represent the lion’s share in volume and value terms.

Customer growth has averaged around 3% since 2000 with the increase in the value of energy sales rising from 1% in 2003 to 5.77% percent in 2006.

How does Codensa do it?

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The Codensa Case: Electricity and Related Services for the BOP in Colombia