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general news 209

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.

Published in general news Written by August 15 2020 0

Three contractors principally involved in EPM's US$5 billion, 2.4-gigawatt Hidroituango hydroelectric plant on August 14 unveiled a letter slamming EPM's new COP$9.9 trillion (US$2.7 billion) "conciliation" claim tied to a diversion-tunnel collapse two years ago.

The contractors making-up the "Consorcio CCI Ituango" consortium -- Camarga Correa Infra, Constructora Conconcreto and Coninsa Ramon H. – state in their letter to EPM general manager Alvaro Rendon that they are stunned by the new EPM compensation claim.

The conciliation demand, “ as well as the allegations of responsibility that you make against the Consortium, are unusual, to say the least, and contradict the conduct of EPM observed so far with respect to the contract, since no requirement or questioning has existed on the part of [CCC Ituango] regarding the way in which our obligations were fulfilled in relation to the construction of the GAD [diversion tunnel] and the contract in general.

“Contrary to the above, there have been clear expressions of appreciation for the work carried out by the CCC Ituango Consortium, work that, incidentally, prevented the destruction of the dam, avoiding what would have been the worst catastrophe in the history of the country,” according to the letter.

“If there were doubts on the part of EPM regarding our suitability or the belief that we incurred in a breach as serious as the one that we are being charged today, we would [not] have been entrusted with the execution of the project recovery activities.

“[T]he Consortium, respectful of the rule of law, has always been clear that any of the parties has the right to go to the respective judicial instances to resolve disputes that may exist between them.

“However, in this case, the truth is that between the parties there has not been any example of a controversy related to the breaches that are now being imputed to us, and as an example of this it should be noted that none of the enforcement or sanction mechanisms incorporated in the contract [have been invoked] -- all the more reason to firmly question the fact that EPM abruptly adopts a position that goes against its previous actions and begins to foist upon us, not only in the limited scope of the judicial controversy but also in a public and ostentatious manner, an alleged breach that had never been dealt with directly during contract performance.

“We also want to warn about the serious and onerous consequences that are generated for the Consortium and the companies that comprise it, as a result of the initiation of this procedure given the direct impact on their image and their operation.

“On the other hand, we cannot accept that the alleged responsibility is entrusted to us, not based on the quality of the works entrusted to us, but for an alleged fault consisting of not warning EPM about alleged design errors.

“Therefore, in line with the foregoing, it should be noted that [engineering consultant] Skava’s report [on the diversion-tunnel collapse] that supports your request for preliminary conciliation flatly discards the hypotheses that could fall on our contractual obligations as builders related to issues such as the quality of the installed support, the concrete works, etcetera.

“In consideration of the foregoing, we call on EPM to reconsider the initial decision and withdraw the claims made against the CCC Ituango Consortium and against its members,” the letter concludes.

Fitch Ratings Warning

On a related front, Wall Street bond rater Fitch Ratings announced August 13 that it’s cutting EPM’s debt rating to ‘BBB-‘ just one step short of losing qualification, which potentially could hobble future debt floats and raise interest costs.

“The downgrading is due to a greater intervention by the owner of EPM, the city of Medellín [BBB- Negative Outlook], in the management of the company,” according to Fitch

“This represents a deterioration of the company’s corporate governance controls. Fitch believes that the actions recently taken by the company are contrary to the provisions of the Governance Agreement, signed on April 23, 2007, between the Mayor’s Office of Medellín and EPM’s management.

“Earlier this week, the eight independent members of EPM's board of directors announced their resignations after the newly elected mayor of Medellín instructed the company to take certain actions without board approval.

“The resignations of eight of the nine board members follow an announcement in July 2020 that EPM’s social goal may be expanded beyond the provision of public services to include tourism services, new technologies, infrastructure, bridges and tunnels, among others.

“In addition, the company filed a COP$9.9 trillion (approximately US$2.7 billion) lawsuit this week against contractors, supervisors and contractor insurance companies for its beleaguered 2.4 gigawatt (GW) Hidroituango project without consulting with the board of directors.

“In June 2020, the company announced an additional delay [in Hidroituango start-up] due to the Coronavirus pandemic. Fitch's expectation is that 300 megawatts (MW) of the project will be in operation by early 2022.

"Additional technical and infrastructure complications are possible, and could further delay the project's commercial operation date.

“Additional unforeseen contingencies have been partially mitigated after the insurance company announced that the damages derived from the event would be covered by the insurance policy, although there is no clarity on when and what damages will be covered. The resolution of the Negative Observation could take more than six months due to these uncertainties,” Fitch added.

Published in general news Written by August 12 2020 0

Colombia’s Ministry of Transport announced August 12 that Medellin’s José María Córdova (JMC) international airport in suburban Rionegro will host six “pilot test” passenger routes -- once airlines obtain takeoff/landing “slots” from the Aerocivil regulatory agency.

“After being approved for the pilot plan by the Interior Ministry, the airlines must request from Aerocivil the itineraries and slots to start the commercialization of the flights,” according to Airplan, the operator of JMC airport.

First out of the gate, Medellin-based EasyFly announced August 13 that at JMC it will begin daily flights to/from Bucaramanga and to/from Pereira starting Tuesday, August 18.

The newly approved “pilot” routes will connect JMC to-and-from Palonegro de Lebrija airport (Bucaramanga), Camilo Daza airport (Cúcuta), Matecaña airport (Pereira), La Nubia airport (Manizales), El Edén airport (Armenia) and Gustavo Rojas Pinilla airport (San Andrés island).

However, before any flights can begin, “all the recommendations of the biosafety protocols of the Ministry of Health must be followed,” added Transport Minister Ángela María Orozco.

As an extra precaution, passengers booking flights between these seven cities are supposed to “take an antigen test or [get a] certificate of the other diagnostic or confirmatory alternatives, a maximum of two days prior to the flight.”

This new test requirement is an “additional measure to what is established in the [Health Ministry passenger flight] protocols,” according to an August 11 Interior Ministry order authorizing the new “pilot” flights to-and-from JMC airport.

According to a July 16, 2020 bulletin from the U.S. Food & Drug Administration (FDA), “antigen tests usually provide results diagnosing an active Coronavirus infection faster than molecular tests [PCR tests, the type most used in Colombia and the U.S.], but antigen tests have a higher chance of missing an active infection. If an antigen test shows a negative result indicating that you do not have an active coronavirus infection,[then]  your health care provider may order a molecular test to confirm the result.”

As for antibody (serology) tests, such tests “may provide quick results, but should not be used to diagnose an active infection,” according to FDA. “Antibody tests only detect antibodies the immune system develops in response to the virus, not the virus itself. It can take days to several weeks to develop enough antibodies to be detected in a test.”

By contrast, while PCR molecular tests are by far the most reliable for Covid-19 detection, actual reporting of PCR test results typically take several days or even a full week in Colombia (and in most of the U.S.), because PCR test labs here are currently overwhelmed.

Hence a PCR test doesn’t seem a practical option for meeting the new Interior Ministry rule requiring passengers to get a Covid-19 test result within two days prior to a booked flight.

According to the Health Ministry, the other mandatory biosafety protocols for these new flights include:

1. Passengers must arrive a maximum of two hours in advance of the scheduled time of their flight, and with their electronic check-in ready to avoid delays and congestion.
2. Passengers should only carry personal luggage, bags or small backpacks that can be stored under the passenger seat. The rest of the luggage will go into the plane’s baggage compartment.
3. Passengers should have already downloaded the CoronApp-Colombia application onto their cell phones, with all required information filled out.
4. Only passengers and those who work at the airport can enter the terminal. 
5. Temperature control will be carried out for all persons entering an airport and upon the arrival of flights.
6. “All people, without exception, passengers and workers who are in an airport must use personal protection elements (face masks).”
7. All airport users, crews and employees are obliged to respect the physical distance of two meters in areas such as counters, scanners and in the lines to board aircraft.
8. Boarding will be authorized only when the aircraft is ready.
9. Inside the aircraft, on-board service will not be provided, and travelers will be asked not to use inflight entertainment systems such as screens, mobile phones, among others. As far as possible, aircraft toilets should not be used.
10. Passengers and crew will wear masks at all times during the flight.
11. Passengers must remain seated during the flight.

Published in general news Written by August 12 2020 0

Medellin-based electric power giant EPM announced August 11 that it just filed a COP$5.383 trillion (US$1.44 billion) claim against Mapfre Insurance (Colombia) as part of parallel conciliation procedures that seek to resolve an estimated US$2.6 billion in losses resulting from a 2018 tunnel collapse at the Hidroituango hydroelectric project in Antioquia.

The claim against Mapfre is a “request for prejudicial conciliation” in a Medellin Administrative Court “based on the occurrence of a loss in the ‘Construction All Risk Policy’” that EPM had previously bought to protect itself against potential damages and losses during and after construction of its 2.4-gigawatt, US$5 billion Hidroituango project, according to EPM.

The April 28, 2018 collapse of the "auxiliary deviation gallery" (GAD) diversion tunnel inside the Hidroituango project resulted in both physical and financial damages “that have been estimated, to date, in a sum close to COP$10 trillion [US$2.6 billion],” according to EPM.

“Taking into account the coverage, protections and limits of the [Mapfre] policy, the claims of the conciliation request amount to the sum of COP$5.383 trillion [US$1.44 billion],” according to EPM.

EPM previously had announced a parallel conciliation process involving Hidroituango’s construction and design contractors as well as their insurors --Suramericana and Chubb (see Medellin Herald August 10, 2020).

EPM Board Resigns in Protest

Meanwhile, EPM’s entire board -- except for Medellin Mayor Daniel Quintero -- announced August 10 that they have resigned en-masse in protest over EPM general manager Alvaro Guillermo Rendon and Mayor Quintero’s failure to consult them in transcendental decisions -- including the new Hidroituango conciliation process as well as a prior proposed scheme that would radically alter EPM’s entire business model (see Medellin Herald July 3, 2020).

While EPM and the Mayor legally are required to consult with the Medellin City Council on transcendental matters affecting city-owned EPM, the company’s management also “ought to discuss in detail and seek the counsel of the Board of Directors” before making radical decisions, according to the joint letter of resignation signed by the board members.

“We are worried that [top EPM management] are not observing good practices of corporate governance that have characterized Grupo Empresarial EPM,” the letter continues.

Rather than embarking on far-reaching schemes without prior Board consultation, EPM instead ought to prioritize completion of the Hidroituango project, successfully integrate the recently acquired “Caribe Mar” power utility in northern Colombia, and focus on Covid-19 impacts that potentially threaten the finances of its power customers, according to their letter.

Given the “repeated ignoring of the Board of Directors, we are obliged to present our resignation,” the letter concludes.

EPM Management Response

Reacting to the Board resignation, EPM filed an August 11 statement with Colombia’s Superfinanciera oversight agency giving its response.

In the statement, EPM claims that the earlier joint proposal (since withdrawn) by EPM and Mayor Quintero that would radically alter EPM’s business model “had been presented to the board members” even though “the competence for the reform of the statutes is not the Board of Directors, but the City Council, at the initiative of the Mayor.”

In addition, decisions about the new Hidroituango conciliation scheme “did not belong to the Board of Directors,” according to the EPM filing.  What's more, the conciliation decision bypassed the Board because “the terms conferred by the procedural regulations for submitting claims were close to being fulfilled, under penalty of expiration” by a crucial deadline, according to EPM.

Antioquia’s Business Associations Rip EPM Leadership

Meanwhile, the influential “Comite Intergremial de Antioquia” (the Inter-Trade Committee of Antioquia) -- which includes all 29 of Antioquia’s main business trade associations and all five Chambers of Commerce -- issued an August 12 bulletin denouncing EPM’s top management for actions that triggered the EPM Board’s mass resignation.

“We consider [EPM management’s] ignoring of its statutory Board of Directors in matters of enormous and strategic transcendence -- ignoring basic and fundamental aspects of the norms of its own corporate governance -- puts at risk the stability and interests of the institution,” according to the Committee bulletin.

The resulting mass resignation of the Board “generates a loss of credibility in the management of the enterprise, gravely affecting its operation, its relationship with lenders and investors, triggering future problems that will result in dire social and economic consequences that will affect millions of persons,” according to the group.

“The Inter-Trade Committee of Antioquia respectfully requests a clear, coherent and sensible explanation on behalf of the legal representative of [EPM] about this confused, questionable and unfortunate situation.”

Because of the EPM Board’s mass resignation, “we announce a decision to promote immediately the formation of a Civic Committee which, acting in oversight, will jealously guard the interests of EPM -- which are the interests of Medellin and Antioquia -- and [the Committee] will act solely under technical and sensible criteria, opposing and denouncing irregular actions,” the bulletin concludes.

Published in general news Written by July 28 2020 0

Former Medellin Mayor Federico Gutiérrez (2016-2019) once again is helping to move Medellin into the limelight via an interview published in the latest edition of the International Monetary Fund (IMF) Finance & Development monthly magazine.

The former Mayor – now a national political commentator and seen as a likely pre-candidate for Colombia’s Presidential elections in 2022 – enjoyed a well-recognized reputation here as an unpretentious, transparent, bright and exuberant person who was happiest -- often actually joyous -- when meeting and listening to ordinary citizens, especially when walking around Medellin’s poorest neighborhoods.

Yet Gutiérrez – a soft-spoken, political moderate – simultaneously was just as comfortable dealing with the city’s business-sector movers-and-shakers -- and he showed notable facility in intellectual debates on public policy, economic issues and consensus-making.

Below is the IMF interview published in its entirety:

Former Mayor Federico Gutiérrez Discusses how Prioritizing Security and Sustainability Paved the Way for a 21st Century City
Volume 57, Number 2
International Monetary Fund Finance & Development (F&D) In The Trenches

In 1991, Medellín, Colombia’s second-largest urban area, was the world’s most violent city. Today, the “City of Eternal Spring” is internationally recognized as one of the most innovative, inclusive, and sustainable cities in the world.

Federico Gutiérrez, born in Medellín in 1974 at the advent of Colombia’s violent period of armed conflict, was the city’s mayor from January 2016 until January 2020—helping spearhead many efforts to cement the city’s future as one of peace and prosperity. He credits the determination and unity shown by the people of Medellín for their commitment to overcoming violence and conflict, which has won their city accolades and admiration.

Speaking with Finance & Development’s (F&D) Marjorie Henríquez for our latest issue of F&D, Gutiérrez shares his thoughts on the city’s remarkable transformation over the past three decades.

F&D: What was the turning point for Medellín?

Gutierrez: In the 1980s and 1990s our society hit rock bottom with the tragedy of narcoterrorism. In 1991 we recorded a homicide rate of 381 murders per 100,000 inhabitants. Today the rate is approximately 20 per 100,000 inhabitants -- a 95% decrease. Although the only acceptable figure is zero, we have achieved significant progress in curbing violence and ensuring respect for life.

As to whether there was a specific turning point, that is complicated and open to debate. Ever since businesspeople decided to stay in Medellín in the 1980s and 1990s -- not giving in to the violence -- we began to develop a vital strategy rooted in teamwork. The business fabric of our city is extremely solid, and this can be explained to a great extent by the difficulties that the private sector had to face in order to survive. In the midst of violence, staying was a great act of bravery.

There were no shortcuts, but there were practical solutions. One of the latter involved partnerships between the public sector, private sector, academia, and civil society. Teamwork as a society was a determining factor in the city’s social transformation. The mafia upended our values: it turned hard and honest work into easy money, sobriety into opulence and, worst of all, it took the value out of life and instead put a price on it. Though we still have a long way to go, we have started recovering such values as life, respect, and freedom.

In fewer than three decades, Medellín has become a benchmark for the world. It is a socially innovative city that is today an affiliate center for the Fourth Industrial Revolution for Latin America, in partnership with the World Economic Forum. Experiencing the worst things possible as a society has made us stronger and more resilient. Medellín is a city that acknowledges its past, takes pride in its present, and above all, views its future optimistically.

F&D: As mayor, what were your key priorities?

Gutierrez: A government’s priorities must, in some way, be the priorities of the people. For us, they were education, security, and sustainability.

We had the highest education budget in Medellín’s history. With one of the flagship programs, we managed to return more than 8,000 children who were outside the educational system for various reasons to the classrooms. We also gave more than 43,000 scholarships for higher education. That is the best strategy for security in the long term—giving opportunities to succeed within the framework of legality.

On security, we dealt forceful blows to structures that had been operating for decades. The security issue is still quite complex. There is criminality, but it is much quieter than that of the cartels of the 1980s and 1990s. Our approach involves more than police strategies—it is a comprehensive model that provides opportunities and builds trust, fights crime, and focuses on strategic social investment by the state where there had previously been a vacuum, allowing lawlessness to prevail.

On sustainability, the first thing we did was to put air quality on the city’s agenda. Due to Medellín’s topography and winds, air quality decreases significantly twice a year: March and October. Institutions had the data on this for years without sharing it with the public. People thought smog was haze. We started by openly recognizing the problem. Then we set out to become Latin America’s capital of sustainable mobility: we added 65 electric buses to the city’s fleet, and the older buses were renovated with clean technologies.

New Metrocables (the city’s gondola lift system), 80 kilometers of new bike paths, and more sidewalks. We finished the technical, legal, and financial structuring of a new tram in the western part of the city. We also started a pilot of 100% electric taxis. I am an advocate of public transportation. Few things are more democratic than a good public space and a good system of mass public transport.

We also created 36 green corridors that open up the most congested roads in the city, and we planted more than 890,000 trees.

F&D: Describe some of Medellín’s most innovative achievements.

Gutierrez: Some call what has happened here ‘The Medellín miracle.’ But this was no miracle. It reflects many years of hard work.

For example, with the help of the business sector, we launched ‘Weaving Homes’ (Tejiendo Hogares), a commitment to building social fabric through training in positive discipline for families.

We understood that it was useless to have the best neighborhood infrastructure if what happened inside homes included violence against women and children.

We also launched Medellín Embraces Its History (Medellín abraza su historia) to memorialize the fight for the culture of legality, which included an upgrade to the House of Memory Museum, filming documentaries, and demolishing the Monaco building -- Pablo Escobar’s former residence -- to create space for a memorial park honoring narcoterrorism victims. We also created Parceros -- “Buddies” -- a program focused on recovering young people from criminal activity.

We have built an institutional framework to support social investment. Successive administrations have given continuity to city projects with the understanding that things do not simply start afresh every four years with an election.

F&D: How did you ensure that Medellín stayed on track?

Gutierrez: Medellín’s success is based on its people and shared trust. The long-term process of rebuilding the city is a collective endeavor. Nobody succeeds in isolation.

The first step was to acknowledge results achieved in the past, continuing but also building on them, bearing in mind that a leader’s time in office is short. We improved the quality of life, as shown by the fact that we have reached our highest point in the multidimensional quality of life index.

We invested resources efficiently and transparently where needed—not where we would have garnered the most votes. We took action in areas where the city continues to reap benefits even today: fighting crime and standing up for law and order, raising awareness about the environment and air quality, curbing the school dropout rate, making a bid to become a Latin American champion for sustainable mobility, and showcasing Medellín as an affiliate center for the fourth industrial revolution.

F&D: How did you learn about the people’s needs?

Gutierrez: For years I walked the streets of Medellín, talking to people even before I became mayor. As a leader, you must know how to listen, put yourself in somebody else’s shoes, and understand their daily struggles.

Published in general news Written by July 10 2020 0

Medellin-based multinational utilities giant EPM announced July 10 that it supports Medellin Mayor Daniel Quintero’s new decision to postpone debate on a proposal that would vastly expand EPM’s areas of business.

The proposal (see Medellin Herald July 3, 2020) would have EPM launch into whole new areas nationally and internationally, including highway and mass-transit infrastructure projects, manufacture and supply of renewable-energy systems and services, and a vast array of commercial services for consumers and businesses.

However, Medellin Mayor Daniel Quintero announced late last night (July 9) via his Twitter account that “social sectors and some businesses have asked us to withdraw the [proposed] project so that it can be discussed inside and outside the [City] Council in working groups. I always like to buy time and move fast but in this they are right. The project will be presented in October. In the meantime, we will create working groups with unions, citizens and social leaders to build together the future of our EPM."

Then today (July 10), EPM announced via its official Twitter account that “we want to lead technological innovation processes, taking care of the environment, guaranteeing well-being and quality in services. That is why we support the decision of our Mayor Quintero and we continue with the purpose of working on this initiative.”

Prior to the new EPM and Mayoral decisions to postpone debate on the proposal, Medellin City Council President Luis Bernardo Vélez announced July 8 that “changing the corporate purpose of [EPM] requires in-depth study, and that task must be addressed before making any decision that affects the interests of citizens.”

In the proposal, EPM and the Mayor prudently warn that while public utilities need to expand and evolve in order to survive in an ever-more-competitive business world, EPM must be careful to avoid undercutting its exceptionally good bond ratings with both Colombian and foreign investors. The issue: Big expansions into new business areas potentially could violate existing bond covenants -- possibly triggering massive, expensive prepayments -- and potentially could harm loan terms and interest-rates on any future bond floats, the proposal adds.

Meanwhile, on the bond front, EPM general manager Álvaro Rendón López on July 8 hailed a just-completed peso/dollar bond-float totaling US$751 million.

The float included COP$635 billion in peso-denominated debt (equivalent to US$176 million) plus another US$575 million in dollar-denominated debt, with investors in the United States, Canada, Europe, Asia, Chile, Peru and Colombia eagerly gobbling-up the offer -- actually demanding 3.4 times the total amount offered by EPM, Rendón noted.

“With this operation, EPM becomes the largest issuer of bonds denominated in Colombian pesos in this [international] market, this being its fifth operation which includes this [combined peso-and-dollar] financing method,” according to EPM.

“The placement results are a reflection of the credibility of local and international investors in EPM’s financial strength, even amid the current circumstances of uncertainty in the economy worldwide due to the effects caused by the Coronavirus pandemic,” Rendón said.

“The international bond issue received an investment grade rating, equal to that of EPM, by the firms Fitch Ratings and Moody’s,” EPM added. “For Fitch Ratings, EPM’s ratings are the result of the company's low commercial risk, thanks to its diversification and characteristics as a provider of public services.

“For its part, Moody’s affirms that ‘EPM's ratings reflect its consolidated and diversified income base by sector, with the electricity distribution business having the largest contribution to EBITDA.’”

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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.

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