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Published in general news Written by September 07 2020 0

A just-released Hidroituango tunnel-collapse report for Mapfre Insurance’s UK-based reinsurance loss adjuster Advanta Global Services – publicly revealed today (September 7) via Medellin Mayor Daniel Quintero’s Twitter account – sparks renewed “corruption” and “cover-up” accusations brought by Mayor Quintero against former EPM directors and former Medellin Mayor Federico Gutierrez.

Ironically, the Advanta report –dated August 2, 2019, but only released now – arrives at mainly the same conclusions earlier found in Skava Consulting’s February 28, 2019 report to EPM (see Medellin Herald March 1, 2019, “EPM: Design Flaw Caused Hidroituango Tunnel Collapse”).

EPM publicly released the Skava report with similar findings to Advanta. So it's unclear how Mayor Quintero can now claim that Mayor Gutierrez was "covering-up" some supposedly shocking Advanta report that supposedly was "suppressed" to avoid any lawsuit against Hidroituango contractors.

Both reports essentially conclude that collapse of the auxiliary diversion tunnel (ADT, or “GAD” in Spanish) was the combined result of extraordinary water-level changes in the Cauca River during April 2018, combined with insufficient sealing of the floor of the GAD tunnel, ultimately causing an estimated US$2.6 billion in losses -- mainly resulting from nearly four years of lost power sales, plus hundreds of millions of dollars of physical damages.

Yet despite the relatively unsurprising conclusions in the Advanta report, Mayor Quintero is now claiming that former EPM directors and former Medellin Mayor Federico Gutierrez actually “hid” the Advanta report from Quintero and the new EPM management (all taking office in January 2020) because it supposedly justifies the new “conciliation” lawsuit brought by Quintero and new EPM general manager Alvaro Rendon against Hidroituango contractors and insurers.

Quintero claims that the prior EPM board – which resigned en-mass last month following Quintero’s failure consult with them on the risky “conciliation” lawsuit – either had "corrupt" ties to Hidroituango-involved companies or else to companies that have historically done business with EPM. Hence EPM’s former Board and management – along with former Mayor Gutierrez -- supposedly put the financial interest of Hidroituango contractors and insurors over the interest of EPM in recovering losses resulting from the tunnel collapse.

One big problem with this argument: Neither the Advanta report nor the Skava report found that the supposedly defective design or construction of the GAD tunnel inevitably led to the tunnel collapse. Instead, both reports cite unusual Cauca River-flow fluctuations prior to the collapse -- coincident with what's now described (in hindsight) as GAD tunnel design and/or construction flaws.

This uncertainty factor – the lack of an inevitability finding -- might help explain why Mapfre – having read both the Advanta and Skava reports earlier last year – nevertheless ultimately decided to pay EPM US$150 million for Hidroituango damages in December 2019, in what would be the first installment for a policy that covers up-to-US$2.55 billion in physical damages and up-to-US$628 million for lost power sales.

Below are all 10 conclusions of the “new” Advanta report that Mayor Quintero now claims was “hidden” from him and new EPM management -- but which inexplicably hadn’t been publicly released by Quintero until now, eight months after he took office last January:

Advanta Report’s 10 Conclusions

“1. The various parties involved in the project had defined responsibilities as stated in contracts. The 'Asesoria' was responsible for the design process for the tunnels, the classification of the rock mass [adjacent to the dam] and the selection of the support [systems in the tunnels]. The 'Interventoria' was responsible for ensuring the project was built according to the contract.

“2. The project operated a risk management program at a high level but it did not comply with the Tunnel Code of Practice because it did not have lower level construction stage risk management and did not control events using a risk mitigation program.

“3. The design of the diversion tunnels was generally in accordance with the nominated codes, standards and normal industry practice. The observational method was a significant component of the design and construction process. Construction of the LDT [left diversion tunnel] and RDT [right diversion tunnel] followed the OM [Observational Method], for example the design was verified during construction using the convergence data. However, the OM was not correctly applied to the ADT [Auxiliary Diversion Tunnel], for example, the convergence was not measured soon enough to be used to verify the design and adjust the [tunnel integrity] support.

“4. The LDT and RDT were claimed to have functioned successfully during four years of operation, so the Asesoria used the experience and data from this and other tunnels to optimize the ADT support design. The ADT support was, however, lightened in comparison with the LDT and RDT such that it [the ADT] was vulnerable to a highly irregular shape, erosion and water pressure changes. Furthermore, the Aesoria’s analysis showed that the support had to be fully installed and working before the [tunnel excavation face] was advanced.

“5. The rock mass in the ADT was weaker around the shear zones than the design assumptions for Type-III ground and it was allowed to relax more than expected by the design because the [excavation] face was advanced before the grout was cured. Consequently, the excavated rock was not controlled by the support installed and the support was not enhanced to compensate for over-relaxation of the rock, such as use of active support to eliminate these weaknesses, as would have been done if the OM [Observational Method] had been implemented correctly as was done in the LDT and RDT. Furthermore, the steel mesh required for shear zones was not installed at the location of the collapse.

“6. Also, the tunnel was not built in accordance with the design, nor the technical specification because the thickness of the shot-crete was not measured by depth pins, the blast lengths were excessive at times and a concrete floor was not installed to protect weak rock and shear zones from erosion by flowing water.

“7. The tunnel showed clear signs of distress during construction because the Contractor made frequent use of additional support to advance the face (spiles), [despite] persistent overbreak, fallouts of rock and support from the crown and sidewalls, fissures and cracks in shot-crete. These signs of distress of the tunnel were not addressed by the Project as is required by the OM.

“8. The parties advising EPM (Asesoria and Inventoria) and together with the Contractor were aware of where the work did not follow the design, where the construction did not produce the tunnel with the expected shape and support and where the tunnel collapsed during construction. Many of these issues were not remedied because those parties did not agree on the cause or whose responsibility it was to resolve them.

“9. The support installed in the ADT was degraded by turbulent [Cauca River water] flow because it had a highly irregular shape and the floor was eroded because it did not have a concrete cover, which undermined the support from the start of the [water-diversion] operation. The parties had a critical divergence on cause of damage of the rock mass beyond the design assumptions in that the Asesoria considered the damage was ‘poor blasting’ and the Contractor considered it to be ‘pre-existing poor rock.’ This and other matters were not resolved and the ADT was put into service with these vulnerabilities.

“10. A flood event from April 1 to April 16 [2018] increased the pressure of the [Cauca River] water in the rock mass of the shear zone at about kilometer 0+540 by about 50 meters equivalent head over invert level. On or about April 13, 2019, was the peak river level and these vulnerabilities manifested when the groundwater pressurized leading to an imbalance with the water pressure in the tunnel. The river level then dropped faster than the water could drain from the ground [around the tunnel] such that the pressure on the outside of the tunnel was greater than inside the tunnel, overloading the existing support, causing it to fail, leading to fallout of key blocks of rock. This process of fallout of blocks and overloading of remaining support continued until there was a major collapse of the tunnel on April 28, 2018, that caused temporary blockage of the tunnel at around chainage kilometer 0+540, that was breached on April 29, 2019, followed by a final major collapse that completely blocked the tunnel at kilometer 0+520 and progressed to the surface on April 30, 2018” -- which ultimately forced EPM to decide to divert the Cauca River through the machine room to avoid catastrophic dam collapse.

Published in general news Written by September 05 2020 0

EPM’s professional employees union Sinpro on September 4 unveiled a disturbing analysis warning that residents downstream of the Hidroituango hydropower project who earlier sued EPM could seek to grab at least some of the COP$9.9 trillion/US$2.6 billion damages award being sought by EPM in a “conciliation” lawsuit against Hidroituango contractors and insurers.

Sinpro adds that the EPM “conciliation” lawsuit also could result in forfeit or lengthy delay -- 10 years or more in Colombia’s plodding courts -- to recover significant portions of the COP$5.3 trillion (US$1.4 billion) Hidroituango damages policy that EPM has with Hidroituango project insurer Mapfre.

What’s more, if EPM cancels or fails to renew its existing Hidroituango construction deals with its now-sued construction contractors (those contracts are currently set to expire at year-end), then getting a replacement contractor (or contractors) up-to-speed could result in even more costly delays to complete the Hidroituango project, Sinpro warns.

Even an extra one-year delay would cost EPM some COP$2.6 trillion (US$700 million) in lost power sales, on top of millions more dollars in grid-reliability-charges that would be imposed by Colombia’s electric power regulator (CREG), the group warns.

In addition, the calculation doesn't include the possibility that EPM eventually could lose its contentious US$2.6 billion damages claim in the courts, now having apparently dismissed the option of a possibly friendlier -- even if smaller -- settlement deal.

What's more, EPM management’s bypassing of its own Board of Directors in the abrupt “conciliation” lawsuit decision – a move that prompted a mass EPM Board resignation -- triggered a Wall Street downgrading of EPM’s debt rating and stoked fears among major lenders, Sinpro noted. Further ratings-downgrades, prepayment demands and higher interest charges potentially could cripple EPM’s finances.

According to Sinpro, just adding-up the potential losses in a possibly successful counter-suit by Hidroituango downstream residents, plus the possible loss or delays in Mapfre insurance coverage, plus the huge costs of additional construction delays and future CREG fines, could produce an up-to-US$2.1 billion net loss to EPM, rather than a presumed US$2.6 billion gain.

This all triggered by a risky “conciliation” legal maneuver pushed by a new EPM general manager (a lawyer) and a young, inexperienced, populist Mayor who raised “conflict-of-interest” assertions against the former EPM board, some former EPM managers, former Mayors and Medellin’s empresarial class (Grupo Empresarial Antioqueño, GEA).

Prior to the January 2020 election of Medellin Mayor Daniel Quintero -- and Quintero’s appointment of EPM’s new General Manager Alvaro Rendon – EPM had argued that the Hidroituango diversion-tunnel collapse that caused severe damage to the machine room and enormously costly delays in power sales essentially was the result of unforeseeable Cauca River flooding that led to unforeseeable tunnel damage. Insurer Mapfre was already starting to pay damage claims under EPM’s policy, which covers “unforeseeable” events.

However, a technical study by engineering consultant Skava last year found that insufficient sealing of the floor of the diversion tunnel – arguably an engineering error -- contributed to the collapse (see Medellin Herald July 11, 2019, “Design Flaw Caused Hidroituango Tunnel Collapse.”)

But as EPM’s management and Mayor Quintero seem to be discarding the prior “unforeseeable events” argument and instead switching to “contractor error” arguments, then at least part of the COP$5.3 trillion (US$1.4 billion) Mapfre insurance claim could be at risk -- along with potentially huge downstream-resident counter-suit claims that could cite “error” arguments rather than “unforeseen event” arguments, Sinpro warns.

By the time lawsuit claims get a court ruling, Mayor Quintero likely will have long exited the Mayor’s office, as his term ends in 2023. As Sinpro warns, the “conciliation” lawsuit battle could stretch to 2030 and even beyond -- unless Quintero agrees to a rapid settlement that possibly could produce less-than EPM's asked-for US$2.6 billion claim.

What’s more, quickly settling for less than US$2.6 billion – even though this might prove to be a wise financial solution for cash-strapped EPM -- potentially could force EPM to charge higher electricity rates for several years, to recover part of its Hidroituango losses.

Higher electricity rates would be an immediate political problem for Quintero, who campaigned on a populist EPM “rate freeze” promise.

On the other hand, a lengthy court battle -- though financially damaging to EPM in the short-term and possibly even in the long-term -- could be safer politically for Quintero, since he wouldn’t be around in 2030 to take the blame for any court judgment giving EPM less-than-it’s-asking-for. Or (even more so) if the court eventually hands EPM a catastrophic denial of its claims. 

Published in general news Written by September 03 2020 0

Following a new regulation issued by Colombia’s Health Ministry allowing a boost in public-transport passenger capacity, Metro de Medellin announced September 3 it’s switching to a 50% limit on capacity – up from 35% previously.

Both limits are designed to help thwart Covid-19 cross infections by reducing crowding, according to Metro and the Health Ministry. The new, higher-capacity limits likely won’t boost infections, they say, citing a new joint study by Colombia’s Universidad Nacional and the Transport Ministry.

This study found that even at 50% capacity, “public transport systems do not constitute sources of spread of Covid-19 if practices such as the correct and permanent use of masks covering the nose and mouth, keeping quiet and not speaking on cell phones, adequate ventilation and disinfection of transport systems both at the beginning, during and after the trip, among other practices,” according to Metro.

“To increase the occupation of trains, trams, cable cars and buses to 50%, the Medellín Metro will continue its operation with all of its available fleet and will maintain all the prevention measures that have been applied since arrival of the Covid-19 to the country, and will intensify the disinfection and cleaning routines,” according to Metro.

At bus stations and boarding platforms, Metro will enforce social distancing and provide “educational guides that will support the operation of the stations and guide users in their movements,” according to the agency.

“All biosafety regulations and prevention measures such as controls at the entrance from the station by the Police and Metro personnel will be preserved,” according to Metro.

“Given the possibility of the arrival of more users, it is recommended to schedule trips with more time in advance, arrive with the ‘Cívica’ [boarding pass] recharged.

“As of September 1, the northern access to the Alpujarra station has been enabled between 6:00 a.m. and 6:00 p.m. for the entry and exit of passengers. Likewise, from Tuesday, September 8, service will be enabled on the Arví cable. That day the Arví Park will also open.”

“Metro reiterates that the use of a mask is mandatory and permanent for all passengers. It is important to keep in mind that its correct use completely seals the air intake through the upper part of the nose, through the sides of the cheeks and under the chin, which guarantees better protection against the virus.

“Passengers are also asked to remain silent during the journeys to avoid the emission of aerosols and droplets of saliva that can carry the virus and generate potential infections.

“When entering the system, it is recommended to make use of the portable hand washing points and gel dispensers located in the stations. Likewise, practice physical distancing in lines, while waiting for vehicles and inside them,” the agency added.

Published in general news Written by September 01 2020 0

Airplan – operator of Medellin’s Jose Maria Cordova (JMC) international aiport – announced September 1 the resumption of flights by four air carriers to seven Colombian cities today.

VivaAir was first out of the gate for its new service from JMC to Cali, as well as to Santa Marta, San Andres and Bogota.  Avianca likewise launched the first of its four daily flights from JMC to Bogota.

LatAm meanwhile debuted its first once-a-day flights from JMC to Bogota, while Easyfly debuted service to Cali.

In parallel, at Airplan’s downtown-Medellin Olaya Herrera airport (EOH), Satena continued once-a-day flights to Cali and three-a-day flights to Bogota.

Easyfly likewise now has daily flights from EOH to Perira, Monteria, Armenia, Bucaramanga and Cucuta, according to Airplan.

Published in general news Written by August 28 2020 0

Colombia’s biggest national airline Avianca announced August 27 that it will restart national flights from Medellin’s Jose Maria Cordova (JMC) airport to-and-from Bogota starting September 1, then on September 7 relaunch flights at JMC to-and-from Cali and Cartagena.

Following five months grounded because of Covid-19 quarantines, Avianca restarts with 14 national routes, having now passed biosafety protocols “endorsed by the Ministry of Commerce, Industry and Tourism, ProColombia and Icontec with the ‘Certified Biosafety Check-in’ seal,” according to the company.

“Although initially the national operation will be only 12% of that existing before Covid-19 [quarantines], the company expects that demand and the need for connectivity will be activated quickly,” so Avianca will expand its itineraries, routes and frequencies “to the extent that the activation scheme designed by Aerocivil [Civil Aeronautics Authority] allows it,” according to the company.

“The initial fleet for said operation includes 20 aircraft, the Airbus 320 serving the trunk routes and the ATR72 for the regional operation.

“The company hopes that the favorable concept on the viability of international flights, recently issued by the Ministry of Health, will allow the rapid opening of the market to other countries that are high-impact destinations,” the company added.

Also starting September 1, Avianca flights to-and-from Bogotá include Barranquilla, Bucaramanga, Cali, Cartagena, Cúcuta, Montería, Pereira and San Andrés, with Pasto, Santa Marta and Villavicencio added on September 7.

Published in general news Written by August 25 2020 0

Colombia’s Aerocivil aviation authority announced August 24 that Medellin’s downtown Olaya Herrera Airport (EOH) just won rights to restart flights to-and-from 10 cities in Colombia.

Simultaneously, flights to and from Cali and Medellin’s Jose Maria Cordova (JMC) international airport at Rionegro also are now allowed, after five months of Covid-19 quarantine shutdowns.

Flights from Medellin’s EOH airport are now authorized to and from Armenia, Cúcuta, Montería, Pereira, San Andrés island, El Bagre, Tolú, Urrao and Caucasia, according to Aerocivil.

“The operation of these routes, which will benefit hundreds of citizens who need to move between the different cities, must be carried out under strict compliance with the biosafety protocols for all authorized airports,” according to Aerocivil

“It should be remembered that, under the current regulations issued by the national government, it is the mayors, who under their considerations and in accordance with the evolution of contagion in their cities, can autonomously request the inclusion of their airports in the plan of gradual reactivation of the air operation for essential connectivity,” the agency added.

Published in general news Written by August 24 2020 0

Medellin Mayor Daniel Quintero and representatives of the 10 municipalities in Area Metropolitana de Valle de Aburra (AMVA) announced August 24 that they’ve approved a broader economic-reopening schedule that starts now with inter-city bus transport and next week with restaurants and some national flights.

According to AMVA, “the following sectors are being reopened: Ground transportation terminals, airports, gymnasiums, open-air theaters, restaurants, amusement parks, nature areas, sporting areas, motels, discos and mass event centers.”

However, residents must continue to wear masks and practice social distancing at these locations, while all economic sectors must follow strict Health Ministry protocols designed to prevent Covid-19 infections.

Starting August 31, restaurants will reopen. Then, during the first week of September, gymnasiums will open (if the Health Ministry confirms this measure).

The Plaza Mayor convention center will reopen the second week of September, along with all churches, synagogues and temples, as well as Parque Arvi, Cerro Nutibara and El Volador parks.

For the third week of September cinemas, theaters and casinos will reopen, while coliseums will open the first week of October and the Aeroparque Juan Pablo II sports center opens the third week of October.

Bars and discoteques will open the third week of November and the La Macarena concert/event center will reopen in December.

Published in general news Written by August 22 2020 0

Medellin-based electric power and utilities conglomerate EPM is publicly clashing with former Antioquia Governor Luis Perez (2016-2019) over a 15-years-long, debt-financed expansion strategy that has catapulted EPM from just another a local utility to a multinational giant.

“From the path traced in 2006, EPM has become a business group that today has 14 affiliates and 30 subsidiaries, which has allowed it to become one of the main Latin American multinationals” -- and simultaneously funds around 25% of Medellin’s annual city budget from its annual profits, EPM notes.

It’s an extraordinary business model -- created in a city noted for a tradition of entrepreneurship, not only in the private sector but also -- spectacularly so -- in the public sector.

But such expansion has come with growing and even dangerous debt loads, according an August 20, 2020 opinion column written by former Governor Perez for the national business newspaper, La Republica.

“Until 2013 the company [EPM] had an equity much higher than its liabilities,” according to Perez.  "After 2013, liabilities began to grow without limits, exceeding their equity, and by 2020 the company that their executives and their boards claim to defend so much has a burden of liabilities so great that it lost its strength.

“As of 2020, EPM has a net worth of COP$23.7 trillion [US$6.18 billion] with a very high liability of COP$33.6 trillion [US$8.76 billion],” Perez claims -- although this claim is contradicted in EPM’s latest filing with Superfinanciera (see chart, above, showing COP$24 trillion (US$6.25 billion) net equity, rather than a negative asset/liability balance).

“In 14 years, the net worth only multiplied by two times, while the scandalous liabilities multiplied by 13 times. If EPM remains the same in the next 15 years, it could go bankrupt or disappear,” Perez claims.

Since embarking on international expansions, EPM’s investments “are generally a disaster and many describe them as a bad example of international corruption and business inefficiency,” Perez claims, citing allegedly negative net-present-values (NPVs) in EPM investments in HET (Panama), Ticsa (Mexico) and Cururos (Chile).

“In Panama, not only the hydroelectric plant had scandalous cost overruns of US$150 million,” but the Cururos NPV target “was not met and the it actually made a loss of US$111.2 million,” according to Perez.

“If Hidroituango’s construction errors [which Perez claims caused the diversion-tunnel collapse in 2018] add-up to COP$9.9 trillion [US$2.6 billion], then Hidroituango will also cost double [the original estimate], COP$20 trillion [US$5.2 billion]. The Comptroller General of the Republic (2019) asserted that Hidroituango will not make a profit in the next 120 years if it costs more than COP$15 trillion [US$3.9 billion],” Perez claims.

However, that Comptroller report actually found potential cost overruns totaling US$1.7 billion, not the US$3.9 billion that Perez attributes to the Comptroller report (see Medellin Herald November 14, 2019, “Colombia's Controller-General Probing 2 Former Medellin Mayors, 2 Former Antioquia Governors over Hidroituango Errors, Financial Losses.”)

“If the new [EPM] Board does not take drastic measures, EPM will not belong to the people, EPM will belong to the creditors,” Perez concludes.

Ironically, it was Perez himself who last year suggested that EPM should buy-out the Antioquia government’s 53% share in the Hidroituango project, which either would drastically increase EPM’s debt burden or else force massive asset sales, thus hindering its capacity to tap debt markets for future, potentially profitable expansion plans.

EPM Response

Contradicting the Perez claims, EPM on August 20 filed a detailed response with Colombia’s Superfinanciera oversight agency. Below is EPM’s response, reproduced here:

“EPM, a solid and continuously growing company, was created in 1955, and for more than 50 years its target market was limited to Medellín and neighboring municipalities. This stage allowed the consolidation of a solid public service company, which became the engine of development in the region," according to the filing with Superfinanciera.

“In 2006, the company began a process of transformation from the then-local business model to a Grupo Empresarial (Grupo EPM) structure, which was supported by internal analysis, external consultancies that established an organic and inorganic growth plan, which among other objectives sought diversify its portfolio, both in markets and in the incorporation of new lines of business, respecting its central axis as a provider of public services and thus responding to a changing environment.

“The transformation process was based on the need to diversify risk levels, establish a financial structure that would take advantage of the organization’s debt capacity and that would allow it to generate higher revenues for its owner, the Municipality of Medellín -- a situation that to date has materialized with [profit] transfers that are made annually to its owner and that are vital for the social investment and well-being of thousands of people.

“The growth path outlined obliges the company to change the traditional financing structure of its own resources and establish financing schemes where debt is an important leverage of growth, generating a change in the composition of liabilities to equity, and growth in the total assets of the company. It is important to note that as of 2009, and in response to the demands of the international financial markets, EPM began the consolidation of the Group’s financial statements.

“The defined financing scheme requires a greater presence of EPM in the national and international financial markets, which have trusted in its ability to meet its obligations, a situation that has been evidenced in a history of good relations, which has been maintained even in critical moments such as the contingency of the Hidroituango hydroelectric project.

“The demonstration of this is reflected in the ratings given by the rating firms.

“2007: Since 2007, the rating of the Public Debt Bonds issued by EPM had a ‘AAA’ rating by Duff and Phelps de Colombia S.A., today Fitch Ratings.

“2009: Successful bond issues since 2007, initially in the local market. As of 2009, EPM ventures into the international capital market and on that occasion it obtained a ‘Baa3’ and ‘BB+’ rating by Moody’s and Fitch, respectively, which were very positive risk ratings for a newcomer issuer in the international capital market.

“2011-2020: In 2011, the company achieved a risk rating in the investment grade category ‘Baa3’ by Moody’s and ‘BBB-‘ by Fitch Ratings. Successively, in the following issues carried out in 2014, 2017, 2019 and 2020, it obtained ratings of ‘Baa3/BBB, ‘Baa2/BBB +,’ ‘Baa3/BBB’ and ‘Baa3/BBB’ granted by Moody's and Fitch Ratings respectively -- always maintaining the Investment Grade category and sometimes exceeding the country risk rating.

“Local and international banks, as well as multilateral banks have been very important actors in financing the investment, expansion and replacement plans of the company, which have been undertaken to guarantee the quality, timeliness and efficiency in the provision of the services of energy, water, sanitation, cleaning and natural gas for the entire community, mainly in Medellín, Antioquia and Colombia.

“The optimal levels of financial indebtedness are basically linked to the ability of companies to generate the cash flow required to meet financial obligations, a principle that EPM has honored and which is reflected in the fulfillment of all its obligations. The main source of resources for EPM is generated from the operation of the core businesses and the dividends delivered by its subsidiaries.

“Between 2006 and 2019, EPM has received from its affiliates and subsidiaries resources totaling COP$6.1 trillion (US$1.59 billion), of which the controlled companies have paid dividends and others totaling COP$3.5 trillion (US$912 million) and the non-controlled companies totaling COP$2.6 trillion (US$678 million).

“The resources that EPM generates annually have clear applications and are mostly used to guarantee the continuity of public services and fulfill the obligations with different stakeholders. Many of them are the result of changes derived from regulatory frameworks and business dynamics that are different from those of 20 years ago.

“The resources that have been allocated to the Hidroituango project as of June 2020 amount to COP$11.8 trillion (US$3.07 billion). The financing of the total investment has been provided resources totaling COP$5.8 trillion (US$1.5 billion) of debt and the rest from its own resources. Once the project has all its installed capacity (2.4 gigawatts), it is expected to generate an [annual] EBITDA of COP$1.3 trillion (US$339 million) on average.

“EPM is an important taxpayer in Colombia. In the last four years it paid approximately COP$1.7 trillion (US$443 million) in taxes, fees and contributions. It is important to note that, prior to 2006, EPM was a non-taxpayer, thanks to the tax exemption of power transmission and generation activity, an aspect that no longer is in force.

“Transfers to Medellin: EPM has become a lever for the development of Medellín and the quality of life of its inhabitants, through the transfers it makes to the Municipality. Thus, in the 2006-2020 period, surpluses have been delivered to the Municipality of Medellín totaling COP$13.3 trillion (US$3.47 billion) and additional resources totaling COP$2 trillion (US$521 million) were delivered from the UNE-Millicom merger and the sale of Isagen shares.

“EPM’s assets have grown in recent years by 251%, with a significant percentage in property, plant and equipment. [As a result], the company’s equity grew by 111%, increases that have been achieved thanks to a better financial structure and resources generated by business.

“The internal generation of funds and dividends allows estimating that the company could be paying its financial debt in a period of approximately four years. It is important to note that EPM is currently in a period of heavy investments in all its businesses, whose remuneration in accordance with regulations can take between 30 and 40 years, which allows projecting higher cash flows in the future,” the company concludes.

Published in general news Written by August 18 2020 0

Medellin-based electric power giant EPM admitted in an August 17 filing with Colombia’s Superfinanciera oversight agency that its lenders are alarmed over the mass resignation of its Board of Directors following EPM management’s decision to sue Hidroituango contractors and insurers this month without first consulting with the Board.

In the latest filing with Superfinanciera, EPM recounts the decision by Wall Street bond rater Fitch Ratings to cut its credit rating to “BBB-“ with “negative observation” because of EPM management’s contemptuous bypassing of its own Board.

“The reduction of one notch in the international rating of EPM by the rating agency Fitch Ratings, presented on August 13, has not generated, to date, acceleration of financial obligations, the breach or activation of financial covenants, nor has it implied the requirement of additional guarantees by the current financial creditors,” according to the EPM filing.

“On the other hand, since Tuesday, August 11, a series of teleconferences [organized by EPM] have been attended with financial creditors responding to concerns about the corporate governance situation.

“In relation to the events that led to the reduction of the risk rating, EPM has received notification from some local and international financial entities regarding the temporary suspension of commercial relations, which reduces the quotas in operations such as loans, exchange risk hedges and bank guarantees, without, to date, this having had a material effect on EPM’s liquidity and operations,” the filing concludes.

New EPM Board Members

On a related front, Medellin Mayor Daniel Quintero – who like all prior Medellin Mayors is by EPM corporate statutes the automatic chairman of city-owned EPM’s Board – announced August 18 several more new members of the EPM Board, replacing  prior Board members.

The new members include:

1.  Luis Fernando Rico Pinzón, former General Manager of Medellin-based electric power giant Isagen (16 years) and a member of civic promotion group Proantioquia.
2.  Luis Fernando Mejía, current executive director of Colombia’s prestigious Fedesarrollo economic think-tank; former director of Colombia’s National Planning Department (2017-2018) and a former board member of Colombia’s Commission for Regulation of Energy and Gas (CREG, which has crucial oversight over all power generators).
3.  Omar Flórez Vélez, former Mayor of Medellín (1990-1992) and a former EPM Board President during his term as Mayor.
4.  Sandra Suárez Pérez , former Colombia Minister of the Environment, Development and Housing (2013-2016) and currently the managing director of Colombia’s top news magazine, Semana.
5.  Jorge Iván Palacio, former President of Colombia’s Constitutional Court (2013-2015) and a former Magistrate of the Supreme Court.

Page 2 of 17

About Medellin Herald

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.

Medellin Herald welcomes your editorial contributions, comments and story-idea suggestions. Send us a message using the "contact" section.

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Medellín Photo Galery

Medellin, contrasting colors and styles by Gabriel Buitrago

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