Climate change is one of our greatest challenges as an Organization, which is why we commit to mitigation and compensation measures.
GRI (3-3) Climate change is one of the main strategic challenges we are currently facing and, as the Grupo Argos Energy Company, we are committed to reducing our impact, designing effective mitigation measures and compensation and innovative initiatives that help strengthen their adaptability and develop business opportunities. In line with this, we established the goal of becoming carbon neutral, by bringing our carbon footprint to zero.
The Company’s Strategy is to obtain returns for our Shareholders and Investors, with sustainability criteria and, together with our Stakeholders, grow harmoniously and, thus, build a better society that ensures the generation of long-term environmental, social and economic value.
We work on the externalities derived from climate change for the business, the physical and emerging risks present in the territories in which we operate and their possible impact. Thus, we formulated Celsia’s Climate Strategy, which includes mitigation, compensation and adaptation actions.
GRI (3-3) Task Force on Climate-related Financial Disclosures (TCFD): Governance – b. At Celsia, we have an Environmental Policy, which incorporates commitments related to the management of climate change and other atmospheric emissions, among which we highlight:
Impact of Climate Change
GRI (3-3) TCFD: Strategy – b. We constantly identify how climate change impacts us on different fronts. This, in order to have the information and complete panorama to manage mitigation, adaptation and compensation initiatives, which lead us to fulfill our environmental goals.
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Direct and Indirect GHG Emissions
Our Zero-Emissions Target
Scope of the TargetScope 1 and 2
Target ValidationAlthough the goal is not validated by the Science Based Target Initiative (SBTi), we consider that it has a scientific basis, since it is aligned with the Nationally Determined Contributions (NDC) of Colombia.
GHG Emissions Avoided
Emission Intensity and Target
Base Year Emission Intensity
At Celsia, we actively contribute to the fight against climate change; for this reason, we have an Emission-Intensity Target at the Corporate Level:
SASB (IF-EU-110a.3) No recalculation of the information has been presented in our Emission-Reduction Target.
To achieve the Target, the Organization’s Growth Strategy is primarily based on the diversification of the Generation Matrix with renewable sources, disinvesting in assets with high levels of GHG emissions and prioritizing efficient projects, products and services with a positive impact in terms of climate change. This transformation is transversal to all the territories where we operate and is aligned with international standards to reduce emissions throughout the Organization’s Value Chain.
Risks or limiting factors that may affect the achievement of Celsia’s Emission-Reduction Targets:
Scope 3 Emissions
Relevance of the Source for CelsiaFuel and energy-related activities: incorporate GHG emissions from the Value Chain and from transportation and distribution, both from electrical energy imported from the grid and from the extraction and production of fuels used in the Organization’s operation. The fuels included are: Diesel – ACPM, gasoline, natural gas, LPG – propane gas, and fuel oil – Bunker.
Internal Price of Carbon
TCFD: Metrics and Objectives – a. Thanks to the development of strategies aimed at the growth of renewable energies and actions to reduce their greenhouse gas (GHG) emissions, Celsia adjusted its operation to be more efficient; we restored watersheds and led the planting and care of millions of native trees in different Departments of Colombia. We are one of the first companies in the sector to be carbon neutral; that is, Celsia reduced its CO2 emissions and we offset those that we cannot stop emitting, which is a relevant contribution to climate-change mitigation.
We emphasize the reduction of CO2 emissions, an achievement that is closely related to the promotion of renewable energies, energy-efficiency programs and the ReverdeC Ecological-Restoration Program, with which we reached 12,000,000 trees planted and cared for.
Risks and Opportunities in the face of Climate Change
TCFD: Risk Management – a. TCFD: Strategy – c. At Celsia, we use quantitative- and qualitative-scenario analysis to identify physical and transition risks in relation to climate, for business planning, based on different methodologies:
The Transition-Risk Assessment is based on possible scenarios of legislation, technological development or market conditions and is consistent with the expected useful life of the assets or activities.
To prioritize risks related to climate change and determine their importance within Celsia:
For Climate-Risk Assessment, the scope includes:
Risks and Opportunities
GRI (201-2) TCFD: Strategy – a. and c. Risk Management – a. SASB: IF-EU-110a.3 We identified current and potential risks, driven by regulatory, physical, and financial factors related to climate change, that may cause a substantial other direction to our strategy, business operations, revenues, and expenses.
In 2023, the National Development Plan of Colombia will be defined, which establishes the Government’s navigation chart for the next four years. Within the Climate-Change Strategy, this includes the implementation of a system of tradable-emission quotas, where a risk would be the application of a maximum-emission quota for natural-gas generation.
Additionally, in the tax reform, which was approved in November 2022, it was stipulated that the electrical-energy generation, through water resources, must pay three additional and complementary points to the income tax during the taxable periods between 2023-2026, with the total rate being 38%, which could lead to a significant reduction in investments in projects from this source.
The main physical risks that Celsia faces are:
These risks are managed through the application of evaluation strategies for water sources, reforestation activities, which through the ReverdeC Program currently planted and cares for 12,000,000 trees, the efficient use of water, the calculation of the water and carbon footprint and control of sedimentation in reservoirs. Additionally, the development and construction of renewable-generation projects in the coming years and the integration of low-emission products and services into the Portfolio allow mitigating these effects. For the economic quantification of these risks, methodologies are implemented that include expert advice and financial modeling of the Value at Risk (VaR).
TCFD: Risk Management – b. These risks are managed through our mitigation and adaptation actions. Currently, physical risk is transferred through the insurance program that covers material damage, loss of profit and the current and future reliability charge, suffered by our insured assets due to a sudden, unforeseen event of nature. Likewise, we have Business-Continuity Plans and Disaster Risk-Management Plans (DRMPs) for each of our assets.
Financial Risks and Opportunities
GRI (201-2) TCFD: Strategy – a and c. The Company uses financial models and the Scenario-Planning Methodology to propose short-, medium- and long-term strategies that maximize Shareholder value while limiting risk, within the desired values.
These models mainly calculate EBITDA, Return on Invested Capital (ROIC), Return on Capital Employed (ROCE) and Free Cash Flow under scenarios that contemplate changes in commercial policy, price variations and quantities in the different energy-sales channels. These also consider the country’s hydrological cycles and extreme weather events, such as El Niño and La Niña, which may positively or negatively affect the expected results.
In renewable- and environmentally friendly energy projects, we see great financial opportunities: the use of tax benefits such as: Law 1715/14, in Colombia, and Law 45/2004, in Panama. They highlight the financing conditions that guarantee us and the efficiency of the demand based on the change in consumer behavior and energy efficiency.
In 2022, a revolving credit for up to USD 140 Million was signed with International Finance Corporation (IFV), a member of the World Bank Group. This line of credit is primarily linked to the reduction in the intensity of CO2 emissions and, hand in hand with this, the possible sale of carbon credits is considered.
In order to mitigate the effects of climate change and take advantage of the opportunities that can be generated from it, we consider some relevant issues to work on in the short, medium and long term:
TCFD: Strategy – b. Climate change and its respective opportunities have different impacts on financial planning in different areas:
The most-important component of Celsia’s Ecosystem is water resources, the fundamental basis for the sustainable development of our planet and primary input for electrical –
This is how the protection and conservation of water resources – through the placement of unconventional technology in which there is a large-scale use of the wind and solar potential of the territories and the use of low-emission fuels – project a new horizon for Celsia, taking care of every detail, evaluating the possible impacts on water resources, climate change and other natural resources, as well as the risks involved in the development of our operations.
Quantity and Quality Risks
GRI (303-1) SASB (IF-EU-140a.3 In 2022, our Environmental Policy was updated and new action guidelines were established regarding the management of water resources, which ensure continuous improvement within the framework of the Management System, in addition to legal compliance through innovative-conservation actions and efficient use of natural resources. It also contemplates the comprehensive management of environmental impacts and due diligence throughout the Value Chain with the participation of our Stakeholders, striving for the Organization’s permanence over time. Likewise, our Environmental Policy seeks to promote alliances to implement projects and actions in favor of the management and efficient use of water and the management of discharges.
Our programs to reduce water consumption and make efficient use of water resources:
Through the development and maintenance of the Hydrometeorological Network, we verify the potential risks associated with the operation of the generation plants and their surroundings, in scenarios such as floods, droughts, landslides and other natural disasters. We use meteorological data to predict the water flow and availability in reservoirs, and to plan the operation of hydroelectric plants, elements that are complemented by climate-modeling tools to assess the impact of climate change on water availability and on the performance of hydroelectric power plants. Within the analysis to identify potential impacts on operations, we include a review of the quality of the water used for power generation, the amount of sediments, nutrients, pollutants, and other elements that may affect the characteristics of the resource.
Mechanisms to estimate changes in water availability at the local level:
Through tools – such as Global Water Tools and the Water Risk Atlas – the Company identifies sites that are in areas of water stress and monitors the availability of water in the basins where our facilities are located. To monitor and track local water availability, we established Consumption Indicators that make it possible to determine the demand for each site, design programs to reduce water resources, and formulate new strategies to promote the efficient, rational use of resources in our operating assets. We use the Siemens Supervisory Control and Data Acquisition (SCADA) Spectrum software to measure the levels of the water reservoirs in real time and calculate their volumes, which are monitored at our Advanced Vision Operations Center (NOVA).
GRI (303-1) SASB (IF-EU-140a.3) Celsia establishes contacts with its Stakeholders, which allows us to monitor not only possible conflicts but also possible opportunities to support and promote their initiatives.
We participate in local Water-Resource Management Boards in the areas of influence of projects under construction and assets in operation; we develop actions to protect watersheds through participatory ecological-restoration methodologies that involve local communities, institutions and community-based organizations in activity planning and execution. In addition, we carry out prior consultation processes with Ethnic Communities, as well as permanent information and communication events with Stakeholders in the territory.
On the other hand, the interventions of the ReverdeC Program are carried out in coordination with and the endorsement of the environmental authorities of each region, thus prioritizing the sites with the greatest need for improvement of forest cover and potentiating the positive impact on water resources and the communities that benefit from it.
The Company has mechanisms to monitor and follow-up on conflicts associated with the use of water, such as:
Based on the results obtained from the Global Water Tool and Water Atlas Risk, it was determined that:
However, after the entire Hydroclimatic-Monitoring Network is implemented, Celsia will be able to continuously analyze the variables to ensure that the Company can forecast the behavior of these variables in the basins, thus predicting periods of scarcity that could generate potential conflicts over the use of water by Stakeholders.
GRI (303-1) SASB (IF-EU-140a.3) The Organization has a multidisciplinary Regulatory Committee, which analyzes all regulations and quantifies the impact on prices and business. In addition, the Committee performs a detailed analysis of the impact of new policies with the help of historical data or with power- and energy-planning impact models. The Energy Markets Planning and Operation Division evaluates policies based on probabilistic scenarios that include water resources based on availability and the analysis of the average hydrology of rivers, thus forecasting market behavior, regulatory changes in the charge for reliability and price structure, with the aim of reducing risks in long-term transactions.
To estimate potential regulatory changes at the local level in issues related to water resources, the Company has Management Teams in socio-environmental and regulatory affairs that are in charge of following up and monitoring the issues of current and future potential regulatory changes that could affect its operations, including those related to water resources and their associated risks. In addition, we participate in trade associations that keep us informed of proposed regulations; for example: ANDI, ANDESCO and ACOLGEN, who invite us to participate in their review, submitting legal and technical comments or participating in sectoral working groups.
Principal Results in 2022