Colbún—Powering Chile

This case is about Colbún, Chile's second largest electricity generator, which is facing significant uncertainty regarding the cost and availability of alternative energy sources. Problems with the contracted supply of natural gas and the volatility of oil prices, coupled with regulatory changes made by the government, force Colbún to revise its business strategy and its sourcing mix. New legislation will replace historically regulated electricity prices for certain customers with free market prices and therefore change the conditions under which the company must operate. The case also deals with the pros and cons of various energy sources in view of their perceived environmental impact. As the company's CEO, Bernardo Larrain Matte has to take all these different considerations into account when planning Colbún's future, especially in the light of new opportunities and challenges posed by global climate change. The case analyzes the Chilean electricity sector and the operations of Colbún to illustrate the complexities associated with conducting business under the influence of global energy markets, government regulations, and environmental activism.