Methodology for the financial valuation of a power plant under regulatory changes

In this paper is quantified the impact on the financial viability of smaller plants in the Colombian Electricity Market-MEC by modifying the rules of participation in the mechanism of firm energy payment (Cargo por Confiabilidad) from the implementation of the norm Resolución CREG 138/2015. A valuation model is used under the methodology of discounted Free Cash Flow ‑ FCF with a rate for the sector, considering the different sources of funding and structure of income and costs of a 19.9 MW hydroelectric plant taking into account benefits from energy sales and firm energy remuneration and expenses associated with the investment, operating costs and MEC's own. It is found that the implementation of the new regulation would result in significant impacts affecting even the viability of these power plants.