Wednesday, September 19, 2018

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Roberto Peckham

The threat of possible landslides originating in the mountain above EPM’s under-construction, 2.4-gigawatt “Hidroituango” hydroelectric dam in Antioquia had triggered a temporary suspension and evacuation of workers May 29, pending further technical analysis.

However, in a 4 p.m. Wednesday, May 30 press conference, EPM announced that further technical analysis revealed no further movement in the mountain, hence enabling restart of construction work.

Then, in a follow-up press conference on Thursday, May 31, EPM general manager Jorge Londoño de la Cuesta added that a relatively moderate landslide of about 130,000 cubic meters from the mountain adjacent to the dam eventually is likely to fall near the entrance of engineered gates designed to conduct river water to the mechanical room (where the electricity turbines are to be located).

However, if and when this expected landslide happens, significant damage to the dam works isn't now seen very likely. Nor is a massive collapse of the mountain adjacent to the dam seen likely -- a collapse that possibly could block the spillway or perhaps cause a huge wave that could overtop the dam, according to international and local experts evaluating the situation.

With the engineered spillway work nearly complete (likely by June 3), and the planned closing of an access tunnel near the spillway due for completion by around June 5, the last crucial step is raising dam height to 415 meters above sea level (probably by June 7), from 410 meters currently. Those three steps likely ensure that no catastrophic failure of the dam will occur -- and also enable resumption of crucial tunnel works.

Permanent closing of the main diversion tunnel -- damaged and blocked by Cauca River flooding following unusually heavy rains in April and May -- is likely to take another two months, Londoño de la Cuesta explained. Meanwhile, closure, cleaning and evacuation of waters from the mechanical room -- temporarily used to divert Cauca waters because of damage to the main diversion tunnel -- likely will require several more months of work, followed by inspection and repairs to the mechanical room, requiring additional time, he added.

In the original May 29 announcement explaining the temporary halt to construction, EPM had announced: “A movement was detected in the upper part of the mountain, in the same place where on Saturday, May 26, a landslide occurred. As a preventive measure and for safety, 1,500 workers were evacuated who were carrying out works on the dam and landfill. In the operation, no-one was hurt and all employees were relocated to a safe place.

“When the geotechnical conditions stabilize, work will continue.

“In this [geological] massif, which in recent days prompted preventive evacuations for the safety of those who work in that area of the project, permanent monitoring with geologists and high technology is maintained.

“As a result of the monitoring, a [potential landslide] was anticipated and evacuation of the personnel in the field was ordered. Indications are that in the next hours or days there could be new landslides.

“With expert personnel, the company performs permanent geological monitoring with piezometers to measure the pressure of the water, [and EPM also employs] radar, satellite monitoring and laser beams in the [Cauca River water diversion] tunnels to determine the condition of the works.

“Additionally, with surface control points on the mountain, combined with radar, we can detect sensitivities of up to tenths of millimeters that allow us to warn of any eventuality,” according to the company.

Possible Economic Consequences

If some future landslide were to cause significant physical and economic damage to the project, then EPM is prepared to respond with possible asset sales, the company added.

For example, the company potentially could sell various power works in Colombia and in other countries, valued at some COP$3 trillion (US$1.04 billion), according to EPM.

“EPM as of today has cash at the Group level of COP$1.4 trillion [US$484 million} and credit lines approved and not disbursed for US$1.3 billion,” according to the company.

So far in 2018, EPM has generated revenues of COP$5.1 trillion (US$1.76 billion), earnings before interest, taxes, depreciation and amortization (EBITDA) of COP$1.7 trillion (US$588 million) and profits of COP$950 billion (US$329 million), the latter up 21% year-on-year.

In total, EPM’s investments in power and other subsidiaries amount to COP$9.3 trillion (US$3.2 billion), according to the company.

XM National Power-Grid Analysis

On a related front, Medellin-based wholesale power-grid administrator XM on May 29 published results of a nationwide scenario-analysis arising from possible delays to the Hidtroituango project.

“In the short and medium term [one to three years], there are no risks in attention to energy demand of the Sistema Interconectada Nacional [SIN, the Colombian national power grid] and there could be greater thermal power-plant generation requirements,” XM concluded.

However, “in the long term, and in the presence of critical hydrological conditions, there could be insufficiency in the supply of electricity,” XM warned.

“Hidroituango is an indispensable project to meet the energy demand in the country economically, safely and reliably,” the company added.

As for medium-term impacts (two to three years), “modeling considered scenarios of low hydrology and the non-entry of Hidroituango on the planned [start-up] dates -- the first unit [300 megawatts] in December 2018 and the fourth and last in August 2019 [totaling 2.4-gigawatts].

“These analyses indicate that the SIN would have the necessary resources to meet the demand and could [provoke] constant thermal generation requirements in some periods exceeding 70 gigawatt-hours (GWh) per day,” according to XM.

For “long-term” impacts (more than three years), “in the case of critical hydrological scenarios, it can be seen that from the year 2022 there could be moments in which the [power-supply] reliability indicators established by the current regulations are not met -- that is, periods with a deficit between supply and demand of electricity in the SIN,” according to XM .

“Based on the information we have to date, and with the imminent postponement of the entry into production of Hidroituango, no risks are foreseen in the SIN in the short and medium term; but, a greater contribution of thermal generation could be required,” added XM general manager María Nohemi Arboleda.

“As of 2022, the projections identify periods in which there could be insufficiency in the supply of electricity,” she continued. “Our analyses ratify the importance of Hidroituango -- which is why, in view of its delay, it will be necessary to have a greater contribution from the existing power generators, and it is vital to encourage the entry of new generation projects with short construction times, as well as distributed generation in the SIN, as well as demand-response mechanisms.

“We consider very relevant the recent proposal of resolutions issued by the CREG [Colombia’s national power-and-gas regulatory agency] to ensure firm energy to meet the demand of electricity in the medium and long term,” she concluded.


In the first round of presidential elections May 27, moderate conservative Ivan Duque of the Centro Democratico party won the plurality of votes (39%) among five candidates.

Duque will face socialist-populist candidate Gustavo Petro of the “Colombia Humana” party (25% of first-round votes) in the second-round runoff election on June 17.

Duque won in 23 of Colombia’s departments (states), while Petro won in eight -- including the biggest strongholds of cocaine production (Chocó, Vaupés, Cauca, Putumayo and Nariño), all areas where left-wing extremists including ex-FARC, ELN and other narco-terrorist groups control large territories -- and have sympathizers among coca growers and also the socialist dictatorship in neighboring Venezuela, a government that Petro has defended.

Former Medellin mayor, Antioquia governor and public-education proponent Sergio Fajardo – a moderate with big national support among younger voters, students, and sentimental support among many Medellin and Antioquia voters -- took third place in the balloting, with 23.7% of the vote.

Fajardo beat all contenders in Bogota, the national capital, while Duque won Medellin handily (followed by Fajardo) and Petro got a paltry 7% of the Medellin vote.

Ironically, Bogota was suppposed to have been Petro's stronghold. Petro -- a former member of left-wing guerilla group M-19 that once murdered Colombia's Supreme Court members in an attack financed by the late narco kingpin Pablo Escobar -- previously was a Bogota mayor (2012 to 2015), but he left a bitter legacy of administrative chaos, political venom and demagoguery that turned-off many Bogota voters.

Given Antioquia’s overwhelming support for political moderate Duque in the first-round balloting, a significant portion of the Fajardo vote is now likely to swing to Duque in the second round, likely ensuring Duque’s final victory, according to analysts.

In total, Duque won 7.567 million votes in the first round, while Petro got 4.8 million and Fajardo gathered 4.59 million. Fourth-place finisher German Vargas Lleras got 7.3% of the votes (1.4 million). Analysts predict that nearly all of those mainly conservative Vargas voters will switch to Duque in the second round.

Duque, a former economist for the Inter-American Development Bank, is a Bogota native and a former Senator for the Centro Democratico party, formed by former President (now Senator) Alvaro Uribe – Colombia’s most popular politician.

In a speech following the first-round election results, Duque praised Fajardo for his life-long dedication to public education and ethical government, and termed the Vargas campaign as “serious.”

As for Petro, Duque stated: “I invite you today to have a campaign where we can debate clearly . . . [W]e are ready to confront ideas and proposals, we are ready to give Colombia a high-level debate, where we can air our differences, so that Colombians can define the course of the country, because I am sure that hope is above class hatred.”

Following a pattern from the primary election earlier this year, which Duque won handily, Petro’s post-election speech once again insulted Duque and his followers.

“The [party] machines went for Ivan Duque, but that’s not the way politics [should be] in Colombia. Either the country returns to violence or continues towards an era of peace. It is not an agreement with the FARC that is being resolved [by this election], it is much more than that,” Petro said.

Duque, who has criticized terms of the “peace” deal between FARC and outgoing President Juan Manual Santos, responded:

“In Colombia, there are no enemies of peace other than those who have used violence to silence the Colombian people. Therefore, we speak clearly to Colombia: we do not want to tear up the [peace] agreements, what we want is to make clear that the Colombia of peace, is the Colombia where peace meets justice, where there is truth, where there is reparation, there is compliance with penalties, and the wishes of the victims are met and repaired.

“For that reason, today I also say clearly that we have to be kind and generous with that guerrilla base that has made the transition to demobilization, disarmament and reintegration. But we have to ensure that they do not reoffend, that they repair their victims, they tell the whole truth, assuming responsibilities and they fulfill their sentences. Because if we do not have that, [then] peace will never be lasting.”


The Organization for Economic Cooperation and Development (OECD) – the group of the 37 biggest free-market democracies in the world – announced May 25 that Colombia has now completed all main steps to join the group.

Formalization of affiliation will take place May 30 in Paris, when President Juan Manuel Santos and OECD Secretary-General Angel Gurria sign the official “access agreement” papers during the reunion of the OECD Council of Ministers, according to the organization.

The recent, successful conclusion of talks between OECD and the Colombian government on intellectual property rights had been the main sticking point holding-up Colombia’s final approval.

“It’s great news for our country. OECD is the most important organization that promotes the best public policies in the world,” as well as providing a “stimulus to investment,” President Santos said.

As an OECD member, “we have immense possibilities to advance in health, education, the fight against corruption and protection of the environment,” Santos added.

During the seven-years-long accession process, Colombia underwent “in-depth evaluations, carried out by 23 OECD committees, and Colombia has undertaken major reforms to align its legislation, policies and practices with OECD standards on issues including labor, the judicial system, corporate governance of public enterprises, the fight against bribery and the field of trade, and has introduced new policies at the national level on industrial chemicals and waste management,” OECD added.


Medellin-based multinational electric power giant EPM announced 12 pm Thursday, May 24 that it finally reached a crucial safety milestone toward eventual completion of its under-construction, 2.4-gigawatt “Hidroituango” hydroelectric dam on the Cauca River, which had been threatened with possible collapse.

Over the past three weeks, EPM hurriedly scrambled to raise the dam height to at least 410 meters above-sea-level – a height that enables excess Cauca River water to flow safely through an engineered spillway near the top, at 401 meters above sea level, or nine meters below the dam height. The spillway hence avoids water overtopping the dam, which could have caused disaster. 

Now, over the next few weeks, EPM will continue raising the dam height, to at least 415 meters, and will move to close two existing water-diversion tunnels, hence enabling repair work to the mechanical room, damaged during a tunnel-blockage emergency, according to the company.

In recent weeks, excess water flowing on the Cauca has been diverted through engineered diversion tunnels as well as the under-construction mechanical room, all of which are located far below the dam.

However, two out of three of the diversion tunnels had been blocked by rocks and dirt (and possibly logs) -- either occasionally or permanently over the past three weeks -- coincidentally during exceptionally heavy rains in April and May. Unfortunately, the third alternative diversion tunnel had already been cemented-in, in anticipation of a normal, scheduled evolution of the construction project.

A previously undetected geological fault near the main diversion tunnel might have been exposed to surging Cauca River waters over the past weeks, triggering partial tunnel collapses and Cauca water escape-route blockages, EPM officials said.

Suddenly, on May 13, a temporary blockage in the main diversion tunnel burst free, sending millions of gallons of floodwaters downstream, overflowing banks at the town of Puerto Valdivia, causing damage to several dozen homes and a passenger bridge.

That same diversion tunnel still potentially could suddenly unplug in coming days, causing another, temporary flood surge around Puerto Valdivia -- even after the dam spillway is completed, EPM warned.

Fortunately, EPM already set-up an elaborate earning-warning system, alerting residents downstream of the dam well in advance of any possible flood. Thanks to that system, vulnerable populations had long since moved to safer, higher ground, so no-one was killed or injured in the May 13 incident.

That one-time flood incident and the potential threat of a future dam collapse also had forced nearly 24,000 people -- including some 3,300 in the town of Puerto Valdivia -- to flee to higher ground, where they’ve been living for more than a week now, awaiting cancellation of flood threats.

As a result of the completion of the dam spillway system, only the 3,300 residents of Puerto Valdivia will have to remain in higher-ground shelters for the time being, EPM added today.

Despite the typical inconveniences of temporary displacement, at least the evacuees are receiving free food, water, shelter, beds and medical care, all paid-for and organized by EPM. EPM also will pay-for reconstruction of damaged or destroyed homes as well as related infrastructure.

Still, by averting a dam collapse, EPM avoided a disaster that could have wiped-out everything alongside its path for many miles downstream, threatening homes and lives of as many as 200,000 people.

When the main diversion tunnel plugged 10 days ago, EPM temporarily re-routed the Cauca river overflow through the under-construction mechanical room, providing a safe water escape pathway until the dam-raising construction would reach at least 410 meters.

While this temporary diversion helped avoid a catastrophe, it also has caused as-yet-unspecified damage to the mechanical room. Still, EPM managed to rescue some expensive equipment prior to the re-routing through the mechanical room.

Besides physical damage to the mechanical room, the flooding and blockage incident also will push-back start-up of the first 300-megawatts (MW) of the 2.4-gigawatt hydropower project beyond the initially targeted December 2018 start-up, according to EPM.

Despite these disappointments, Colombia’s national association of power producers (ALCOGEN) issued a bulletin May 10 advising that Colombia won’t be lacking power capacity for at least the next three years -- even if Hidroituango’s start-up is delayed by months or even years (although the latter delay now is seen less likely).

EPM also revealed that it has insurance coverage to help pay for the damage to the mechanical room and related infrastructure, as well as loss-of-income from a likely delay in power sales from Hidroituango.

Aside from relatively minor injuries to five EPM workers during the crisis, no downstream citizens were killed or injured by the temporary surges in Cauca water levels -- thanks to EPM’s well-organized alert-and-rescue operations during the crisis, involving numerous government agencies.

 


Medellin-based e-commerce, logistics, warehouse, document security, billing and customer-communications specialist Cadena announced May 17 that its full-year 2017 earnings before interest, taxes, depreciation and amortization (EBITDA) rose 40% year-on-year, with EBITDA margin at 13.4%.

Sales also rose to COP$184 billion (US$63 million), while billings for innovative services rose 22% year-on-year, according to the company.

Cadena credited the EBITDA improvement to the launch of innovative digital products and services last year -- and it expects further net growth this year of around 12%.

Besides aiming to transform its businesses via “100% technology,” Cadena also is reorganizing its business units into four divisions, plus opening two new logistics/distribution centers this year -- in addition to the four existing centers -- which will enable deliveries to all municipalities in Colombia.

“Since we launched our company more than 30 years ago, we had never imagined that we were going to convert ourselves into a completely digital operation,” added Cadena president Juan Manuel del Corral.

“We have evolved from having 100% of our sales via paper products, to the situation today where more than 60% of our sales come from digital services and logistics,” he added.

Thanks to this digital conversion, 22% of all billings in 2017 came from new businesses, which enabled Cadena to occupy strategic market niches as well as add 14 new products, according to the company.

Cadena now has 1,800 employees, four logistics plants, a network of 594 vendors, and a technology infrastructure that enables analysis of more than 2 billion data items each month for more than 740 private and public-sector clients, according to the company.

“With the development of e-commerce platforms, Cadena will become one of the biggest providers of this service and a major ally of the business sector of Colombia,” according to the company.

Among Cadena’s big corporate clients: Une, DirectTV, Telefonica, Tigo, Comcel, ETB, EPM, Emcali, Comfenalco, Comfama, Colsubisido, Carrefour, Exito, Proteccion, Porvenir, Colseguros, Colpatria, Santander, Sudameris, BBVA, Banco de Bogota, Grupo Bancolombia, Coomeva, Metro de Medellin, Nutresa, Sura, ICETEX, ICFES, Copa Airlines, Argos, Postobon, Imusa, Grupo Familia, Hewlett-Packard, Invesa, Procter & Gamble, Camara de Commercio de Medellin, Banco de Occidente, AV Villas, Davivienda, Citibank, Helm Bank and HSBC.


Medellin-based insurance, pensions and finance giant Grupo Sura announced May 15 that its first quarter (1Q) 2018 consolidated profit fell 23.5% year-on-year, to COP$310 billion (US$108.5 million).

Consolidated revenues for the company also dropped 2.2% year-on-year, to COP$4.76 trillion (US$1.66 billion).

Despite the corporate-wide dip in revenues and profits, “positive performance of Suramericana’s and Sura Asset Management's operations partly offset the impact of market volatility on the yields of the investments,” according to the company.

“This external effect was reflected in lower yields for the company’s own investment portfolios that back up the insurance and pensions business, and was also a sharp contrast to this indicator’s positive performance a year ago."

Those investment yields fell by 47% year-on-year, to COP$253 billion (US$88.7 million), according to the company.

“In addition, Suramericana’s decision not to participate in the pension D&S [disability and survivorship] insurance business in Colombia to focus on other solutions more aligned with its strategies also led to lower consolidated revenue,” according to Sura.

Nevertheless, Suramericana enjoyed consolidated revenue growth of 3.6 % year-on-year, hitting COP$3.36 trillion (US$1.17 billion). Suramericana also saw 2.8 % growth in retained premiums, “due significantly to the performance in Chile and Mexico, and the positive dynamics of the health operations in Colombia,” according to Sura.

“This growth came together with a lower claims rate and higher efficiencies, which translated into underwriting profits that improved 31% [year-on-year] compared to the first quarter of 2017.”

Meanwhile, the Sura Asset Management division – which administers pensions, savings, and investments – saw a 6% increase in revenue from commissions in the mandatory-pension business and an even-better 9.7% revenue boost in the voluntary-pension business.

In that division, 82% of its managed pension funds had returns that were “higher than the average for the markets where they operate,” according to Sura. As a result, that division closed 1Q 2018 with COP$393 trillion (US$141 billion) in managed assets, covering 19.2 million clients.

Liabilities decreased by 2.8%, to COP$41.58 trillion (US$14.95 billion), thanks to a reduction of COP$201.9 billion (US$69 million) in financial liabilities. “The behavior of assets and liabilities was reflected in a 4.2% reduction in equity, to COP$25 trillion (US$9 billion),” according to the company.


Medellin-based highway and buildings construction specialist Construcciones El Condor announced this month that its first quarter (1Q) 2018 net profits plunged 86% year-on-year, to COP$17.3 billion (US$5.9 million), down from COP$124 billion (US$43 million) in 1Q 2017.

Earnings before interest, taxes, depreciation and amortization (EBITDA) likewise fell sharply, to COP$34 billion (US$11.7 million), from COP$165 billion (US$57 million) in 1Q 2017.

However, construction EBITDA improved year-on-year, from COP$34 billion (US$11.7 million) in 1Q 2018 versus COP$13.7 billion (US$4.7 million) in 1Q 2017. Gross income likewise improved by 15.3% year-on-year, to COP$269.7 billion (US$93 million), up from COP$234 billion (US$81 million) in 1Q 2017.

Construction backlog is now equivalent to three years of contracts – although dipping year-on-year by COP$198 billion (US$68 million) in 1Q 2018, to COP$2.2 trillion (US$761 million), the company explained.

El Condor continues to make progress on key projects including the “Concession La Pintada” in Antioquia, now 38% complete, including the “Mulatos” tunnel and pilings for the new bridge crossing the Cauca river at the town of La Pintada.

Likewise, the “Tunel del Oriente” tunnels linking Medellin to the Jose Maria Cordoba international aiport at Rionegro are now more than 77% complete, with El Condor having invested more than COP$519 billion (US$179 million) in the project to-date, according to the company.


Medellin-based multinational retail giant Grupo Exito announced May 15 that its first quarter (1Q) 2018 net profits rose year-on-year to COP$9.98 billion (US$3.5 million), up COP$17.5 billion (US$6 million) from the COP$7.6 million (US$2,600) net loss posted in 1Q 2017.

Operating income also rose 6.3% year-on-year, to COP$13.7 trillion (US$4.78 billion), the company reported.

Recurring earnings before interest, taxes, depreciation and amortization (EBITDA) rose 7.2% year-on-year, to COP$693 billion (US$242 million), excluding the impact of a 4% appreciation of the Colombian peso during the period.

Among 1Q 2018 highlights: a 25% growth in wholesale sales by Exito’s “Grupo Pão de Açúcar” (GPA) division in Brazil, which includes stores under the “Assaí” brand name. Exito added 21 new stores in Brazil over the past year, boosting customer-count by 12%.

“The solid growth of 7.5% in sales in local currency in the food segment allowed GPA to assume the leadership of that business in Brazil, accompanied by a satisfactory level of profitability, with a recurring EBITDA of COP$502 billion [US$175 million] and an increase of 12.6% in Colombian pesos,” according to Exito.

“This figure is even more important if one takes into account that in Brazil, deflation of food [prices] in households during the first quarter was 4%, which directly impacts sales.”

As for the Colombian home market, retail sales are showing a “gradual” recovery from recession last year, up a tiny 0.1%, according to Exito. However, e-commerce and home-delivery sales in Colombia are showing relatively strong growth, up 34.8% year-on-year.

Recurring EBITDA in Colombia came-in at COP$107 billion (US$37 million) with an EBITDA margin of 4%, the result of relatively low inflation which impacts sales results.

“Complementary” businesses in Colombia including the “Éxito” credit-card business, the “Seguros Éxito” insurance business, the “Viajes Éxito” travel business, a money-transfer-service business, and the commercial real-estate business collectively grew by a total 31.2%, according to Exito.

In addition, its alliance with the “Rappi” home-delivery service resulted in a 300% jump in deliveries year-on-year in Colombia.

The “cash and carry” format offered at its growing “Surtimayorista” chain in Colombia now operates through nine stores, with sales up 138% year-on-year. “Stores converted to the ‘Surtimayorista’ brand have multiplied sales nearly twice and units [of products] sold have grown 74%. In 2018 the company plans to open at least eight more” of the warehouse-type stores, according to Exito.

Meanwhile, “the real estate business continues to be dynamic thanks to a good level of occupation of its shopping centers and galleries. The ‘Viva Envigado’ and ‘Viva Tunja’ shopping centers under construction have scheduled openings for the second half of 2018 and the construction works are progressing by 77% and 64%, respectively,” according to Exito.

Corporate-wide synergies between Colombia, Brazil, Uruguay and Argentina store operations are seen likely to deliver US$120 million in contribution to EBITDA for full-year 2018, according to Exito.

“Thanks to the implementation of the Colombian textile model in 61 points of sale in Brazil, Uruguay and Argentina, through our Didetexco division, we have become the ninth-biggest exporter of textiles from Colombia,” Exito added.

Meanwhile, in Uruguay, Exito store sales rose 8.5% year-on-year as measured in local currency, helped by summer-season demand, improvement in textile sales and the “Fresh Market” format, according to the company.

In Argentina, Éxito continues to benefit from its comercial real-estate business, with about 170,000 square meters of rentable space, the company added.

Éxito now has 1,554 retail food stores, including 561 in Colombia, 878 in Brasil, 86 in Uruguay and 29 in Argentina, according to the company.


Medellin-based electric power, cement, construction and highway/airport concessionaire Grupo Argos announced May 15 that its first quarter (1Q) 2018 net profits jumped 53% year-on-year, to COP$210 billion (US$73 million).

Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) rose 9% year-on-year, to COP$941 billion (US$328 million), while EBITDA margin hit 28%, 272 basis points higher than in 1Q 2017.

The latest results “include stability of consolidated revenues of COP$3.3 trillion [US$1.1 billion] and growth in all other areas, reaching an operating profit of COP$607 billion [US$211 million], 23% more than in the same period of 2017, the result of the operational efficiencies in all its businesses,” according to Argos.

“Three significant advances are highlighted: First, in the process of deepening our investment in the [highway/airport] concessions business, the Odinsa delisting from the Colombian Stock Exchange was carried out, which will allow the subsidiary to have a more flexible and attractive capital structure. for the global market.

“Secondly, the simplification and strengthening of the capital structure of the energy business was completed, with the issuance of Celsia shares and the sale of the shares in [power producer] Epsa, which leaves an increasingly clear portfolio for the market.

“Finally, Cementos Argos' disinvestment plan continued with two important operations: the sale at the beginning of the year of 13 concrete-block plants in the U.S. [netting Argos US$50 million] and the divestment of three self-generating power plants in Colombia for US$58 million.”

“Our portfolio profitability strategy has given us very good results for our shareholders since, for the third consecutive quarter, all our businesses delivered positive contributions,” added Grupo Argos president Jorge Mario Velásquez.

Revenue and EBITDA gains in the latest quarter “are mainly explained by the sale of the shares of [Colombia power producer] Epsa, which generated a non-recurring income of COP$655 billion [US$228 million]. If we exclude the effects of this operation, revenues show an increase of 10% and a 23% increase in EBITDA,” the company added.

Odinsa Results

During the latest quarter, “an arbitration award in favor of Odinsa stands out -- in the case of the [highway] concession of the Autopistas del Café -- which, in addition to us maintaining the administration [of the concession] until 2027, confirms the good performance of the company. Likewise, the private initiative for the new Cartagena airport was presented, with estimated investments of more than US$600 million,” according to Argos.

As for its Bogota international airport concession, “it is worth noting the increase in passengers at the El Dorado airport, from 7.6 million to 7.9 million, and the stable behavior of daily vehicular traffic of 75,100 vehicles, very similar to the 75,400 recorded in the same period of 2017. These operating results have allowed Odinsa to have revenues of COP$184 billion [US$64 million], 1% more than in the first quarter of last year,” the company added.

Cementos Argos Results

“During the first three months of this year, Cementos Argos announced the use of tires as an alternative fuel source at the Cartagena [cement] plant. The efficiencies achieved by the ‘BEST’ program have allowed to reach an EBITDA of COP$371 billion [US$129 million], 31% more than in the same quarter of the previous year, and the improvement of the EBITDA margin in all the regional areas, to achieve a 19% margin,” according to Argos.

Celsia Results

In the Celsia energy division, “a positive balance included the start of the operation of the Yumbo solar [photovoltaic] farm. With respect to [over-all power plant] results, the company reached an EBITDA of COP$290 billion [US$101 million], 20% more than in the same period of the previous year, and an EBITDA margin of 34%. These results were achieved thanks to the increase in generation by 18%, and by 11% in power sales,” according to Argos.

Real Estate, Pactia Results

During 1Q 2018, the Grupo Argos urban-development division accumulated property deeds totaling 90,000 square meters, and the division realized revenues of COP$10 billion (US$3.5 million) from the sale of lots. “In addition, in the [commercial] real-estate rental business, we highlight the positive results of Pactia which closed the quarter with assets under management of COP$3.4 trillion [US$1.18 billion], and a gross leasable area of 719,000 square meters, growing 40% year-on-year,” according to Argos.


Medellin-based banking giant Bancolombia announced May 15 that its first-quarter (1Q) 2018 net profit dipped 14% year-on-year, to COP$522 billion (US$181.7 million).

Gross loans in 1Q 2018 grew 4.1% when compared to 1Q 2017 “and decreased by 1.1% during the quarter,” according to Bancolombia.

“This annual growth shows moderation in the credit demand in Colombia, as well as an appreciation of the COP [Colombia peso] against the US dollar by 3.6% during the last twelve months. Peso-denominated loans grew 11.1% when compared to 1Q 2017.”

Net interest income dipped 4.1% year-on-year, to COP$2.51 trillion (US$873.7 million).

“This slowdown in net interest income is explained by the adoption of IFRS 9 [international accounting standards] during 2018, which caused a reduction of COP$102 billion [US$35 million] during the quarter. Also, the appreciation of the COP against the US dollar during the last twelve months impacted the number,” the company added

Net fees rose 8.8% year-on-year, “mainly driven by an increase in fees related to credit and debit cards, bancassurance, payments and collections, as well as trust services,” according to Bancolombia.

Provision charges were COP$875 billion (US$304 million) and the coverage ratio for 90-day past due loans was 173.6%, according to the company.

“Provision charges increased by 13.0% when compared to 1Q 2017 and decreased by 5.9% compared to 4Q 2017,” according to Bancolombia. “These provisions allow us to maintain a solid coverage ratio amid a challenging environment,” the company added.

As of March 31, 2018, Bancolombia’s assets totaled COP$200.9 trillion (US$69.9 billion), up 2.1% year-on-year.

“During the [latest] quarter, the COP appreciated 6.8% versus the US dollar and over the past 12 months, it appreciated 3.6%,” the company noted. “The increase in total assets during the quarter is largely explained by the growth in reverse repurchase agreements and derivative financial instruments.”

Also as of March 31, 2018, Bancolombia operations via Banco Agricola in El Salvador, Banistmo in Panama and BAM in Guatemala, represented 24% of total gross loans.

“Gross loans denominated in currencies other than COP, originated by our operations in Central America and the offshore operation of Bancolombia Panama as well as the US dollar-denominated loans in Colombia, accounted for 32% [of total loans] and decreased by 6.9% during 1Q 2018 (when expressed in COP), explained mainly by the reduction of the loan portfolio in dollars in Colombia and the appreciation of the COP against the US dollar during the quarter,” according to the company.

At the end of 1Q 2018, Bancolombia’s liabilities totaled COP$177.7 trillion (US$61.8 billion), “decreasing by 1.0% from the end of 4Q 2017 and increasing by 1.8% compared to 1Q 2017” according to the company,.

“Deposits by customers totaled COP$130 trillion [US$45 billion] or 73.2% of liabilities at the end of 1Q 2018, decreasing by 1.4% during the [latest] quarter and increasing by 4.5% over the last 12 months. The net loans to deposits ratio was 115.0% at the end of 1Q 2018,” the company added.

“Bancolombia’s funding strategy during the last months has been to reduce the average life of time deposits and promote saving and checking accounts in the consumer segment in order to keep the funding cost at a minimum. The objective is to build and maintain ample liquidity and reduce the sensitivity of the balance sheet to cuts in interest rates,” according to the company.

“In the last months, Bancolombia has generated capital organically due to the appropriation of earnings in March 2018 and to the efficient allocation of capital in different products. The annual increase in the RWA [risk-weighted assets indicator] is mainly explained by the growth in the loan book, as well as the market risk,” the company added.


Page 5 of 47

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Medellin Herald is a locally produced, English-language news and advisory service uniquely focused upon a more-mature audience of visitors, investors, conference and trade-show attendees, property buyers, expats, retirees, volunteers and nature lovers.

U.S. native Roberto Peckham, who founded Medellin Herald in 2015, has been residing in metro Medellin since 2005 and has traveled regularly and extensively throughout Colombia since 1981.

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