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Update: 3 Medellin Airlines Pick Up Routes Left by ADA

Colombia’s airline oversight agency Aeronautica Civil de Colombia (ACC) announced April 5, 2019 that three airlines – Aeroejectivos de Antioquia SA(AASA), Servicios Aéreos Panamericanos S.A.S (Sarpa) and Servicio Aéreo De Capurganá S.A. (Searca) are taking-over the flight routes left by the shut-down Aerolinea de Antioquia (ADA).

According to ACC, AASA will have two weekly flights from Medellin’s downtown Olaya Herrera (EOH) airport to-and-from El Bagre, Acandi and Tolu.

Sarpa will have seven weekly flights to-and-from EOH to Bahía and Quibdó, as well as seven other weekly flights to-and-from EOH to Nuquí, Quibdó and Pereira.

As for Searca, it will offer twice-weekly flights to-and-from EOH and Acandí, three weekly flights to-and-from EOH and El Bagre; seven weekly flights to-and-from EOH and Montelíbano; and two weekly flights to-and-from EOH and Tolú.

The new flight services will “guarantee the connectivity of travelers that move to and from the department of Antioquia that formerly used ADA,” said Aeronautica director Juan Carlos Salazar.

“We will continue working to motivate the entry of other operators that facilitate mobility in this region of the country,” Salazar added.


TigoUne 2018 results March 2019

Thursday, 11 July 2019 17:41 Written by

Source: TigoUne

TigoUne: Full-Year 2018 EBITDA Grew 6% Year-on-Year, but Profits Withheld

Medellin-based telecom/internet/cable-TV giant TigoUne announced March 5, 2019 that its full-year 2018 earnings before interest, taxes, depreciation and amortization (EBITDA) rose 6% year-on-year, to COP$1.43 trillion (US$460 million), on revenues of COP$5 trillion (US$1.6 billion), described as “similar to 2017” revenues.

TigoUne – whose ownership is split 50-50 between Luxembourg-based telecom multinational Millicom and Medellin utility Grupo EPM-- didn’t disclose its net income for 2018. But it did reveal in a separate filing with Colombia’s Superfinanciera oversight agency that it plans to retain all 2018 profits rather than distribute any earnings to shareholders.

TigoUne also separately revealed that it plans to make a COP$1 trillion (US$322 million) bond offering in the Colombian stock market, but didn’t offer further details.

Other 2018 operating highlights cited by TigoUne were a total of COP$941 billion (US$303 million) invested in “digital highways that connected to more Colombians”: as well as having “revolutionized the mobile [cell-phone] market in Colombia by being the first operator to have ‘4.5-G’ zones and ‘value proposals’ so that users are always connected.”

“We consolidated [our offering] as the leading telecommunications company in innovation as the first [in Colombia] to perform testing of ‘5G’ networks and having the first ‘4.5G’ zones in the main cities of the country,” added TigoUne president Marcelo Cataldo.

The strong revenues “allowed the company to make a debt repayment of COP$183 billion [US$59 million], reducing our obligations and strengthening our financial situation)” as well as to “keep running an ambitious investment plan,” according to TigoUne.

“In the last four years, the company has invested close to COP$4 trillion (US$1.3 billion) to promote the development of the country.

“Investments in the fixed [telecom] network were reflected in the commercial launch in seven cities: Pasto, Tuluá, Tunja, Sogamoso, Funza, Mosquera and Fusagasugá. Likewise, we increased the network coverage in cities where we already have presence,” according to the company.

“In addition, TigoUne obtained [bond rating] certifications from the three most important risk rating agencies. Fitch Ratings confirmed the rating of the telecommunications company UNE EPM Telecomunicaciones S.A. as a stable perspective (AAA) at the local level, the highest rating a company can have.

“In turn, the credit rating agency highlighted the strength of the company and ratified its international rating "BBB" for the third consecutive year.

“For its part, the technical committee of BRC Standard & Poor’s also confirmed the highest local qualification of payment capacity 'AAA' to UNE EPM Telecomunicaciones S.A. and its subsidiary Colombia Móvil S.A. E.S.P., as well as to the three issues of outstanding bonds that it currently has in the market. To complete, in February 2019, the Moody's firm awarded TigoUne the Baa3 international rating,” the company added.


Sura 2018 results March 2019

Thursday, 11 July 2019 17:39 Written by

Sura Full-Year 2018 Profits Rise 7.6% Year-on-Year

Medellin-based insurance and financial services giant Grupo Sura announced March 1, 2019 that full-year 2018 net income (excluding divestments) rose 7.6% year-on-year to COP$1.4 trillion (US$475.7 million) while fourth-quarter (4Q) 2018 profits rose 28% year-on-year, hitting US$101.8 million.

The “Suramericana” insurance division saw 2018 profits rise 3.6% year-on-year, to COP$524.8 billion (US$ million), while the “Sura Asset Management” division (pensios, savings and investment) saw revenues grow 6.1% year-on-year in Colombia’s “mandatory” pension contributions and 10.7% in the “voluntary” pension sector.

“In comparable [year-on-year] terms, the revenues of Suramericana grew in all its segments: general (13.3%), life (15.8%) and health (21.1%),” according to the company

Revenues in 2018 were trimmed by the divestment of the life-insurance annuity operation in Chile and a decision to not participate in the bidding for a pension insurance scheme in Colombia.

“The operating growth of the main lines of business of Suramericana and Sura Asset Management in 2018, as well as the higher efficiencies, allowed us to offset part of the impact that the high volatility of the financial markets had on the returns of our own investments throughout the year,” added David Bojanini, President of Grupo Sura.

“Under these conditions, the total consolidated revenues of Grupo Sura were COP$19.2 trillion (US$6.5 billion) and decreased 0.8%, during a year marked by the high volatility of the capital markets, which affected income from portfolio returns of pension funds and insurers.

“In addition, the strategic decisions mentioned in the insurance business and the devaluation of local currencies influenced results. Total expenses decreased 0.4%, to COP$17.6 trillion (US$5.94 billion), due to lower loss ratios and reserve adjustments, as well as greater control of expenses.

“As a result, earnings before accounting effects increased 7.6% to COP$1.41 trillion (US$475.7 million) and the net profit was COP$1.34 trillion (US$454.4 million), 7.7% less than in 2017, which reflects the lower income from yields and the accounting effects associated with the mentioned divestments, which do not impact the cash flow,” he added.

In the Suramericana division, “the good operating result contrasts with the 7.3% decrease in investment income and lower non-operating income. If the latter are excluded, the growth in net income is 27.2%. In addition, the retained loss ratio went from 54.8% to 51.5%,” according to Sura.

“In the last year we made important progress in consolidating Seguros SURA in the region, highlighting that we met our income and profit budgets,” added Suramericana president Gonzalo Pérez.

“Also in 2018 we evolved our value offer, for example, with the introduction of individual and patrimonial life-insurance solutions in countries other than Colombia,” he added.

Meanwhile, Sura Asset Management grew its commission income by 6.6%, which totaled COP$2.1 trillion (US706.6 million). The assets under management (AUM) increased 2.8%, for a total value of COP$418.6 trillion (US$128.8 billion), covering 19.6 million customers, up 4.1% year-on-year.

The normalized operating profit of the Asset Management subsidiary grew 0.4%, contrasted with a net profit that decreased 39.7% year-on-year, explained by an accounting loss due to the divestment of life annuities in Chile and lower income from reserves, the company added.


Mineros SA 2018 results March 2019

Thursday, 11 July 2019 17:38 Written by

Socially Responsible Gold Miner Mineros SA Sees 2018 Profits Jump 33% Year-on-Year

Medellin-based multinational gold mining giant Mineros SA announced March 13, 2019 that its full-year 2018 net income rose 33% year-on-year to COP$156 billion (US$50 million), from COP$117 billion (US$37 million) in 2017.

Gross revenues and gold prices also rose a bit more than 1% year-on-year. But earnings before interest, taxes, depreciation and amortization (EBITDA) dipped 8.7%, to COP$260 billion (US$83 million), while EBITDA margin declined 9.7%, to 32.4%, according to the company.

The mainly alluvial-based gold mining operations in Colombia produced 97,921 ounces of gold-equivalent in 2018, down from 103,370 ounces in 2017, according to the company. Nicaragua gold production rose from 104,681 ounces in 2017 to 109,305 ounces in 2018.

As for fourth quarter (4Q) 2018, net income nearly tripled year-on-year, to COP$97 billion (US$31 million), thanks to a 15% hike in output, a favorable COP/U.S. dollar exchange rate and a 1.3% hike in world gold prices.

On a related front, the US$30 million acquisition of the Gualcamayo gold mining operation in Argentina last December netted Mineros an additional 2,791 ounces of gold, on top of its Nicaragua and Colombia production, the company added.

As for the 2019 outlook, Mineros projects that corporate-wide production should be in the range of 280,000 to 300,000 ounces of gold-equivalent. The company added that it foresees “high volatility” in world gold prices but an “upward tendency.”

USAID, Mineros Continue Boosting Social Projects

On another front, the U.S. Agency for International Development (USAID), the Colombian national government and Mineros this month will launch yet another project aiming to help poorer rural families in El Bagre, Nechi and Zaragoza (all in Antioquia) through a new “Women of Gold” (Mujeres de Oro) program.

According to USAID, the “Mujeres de Oro” program will help rural women with projects that boost their economic, social and cultural well-being.

Mineros has a long history of sponsoring numerous projects that benefit poorer rural families in its areas of operations (see Medellin Herald 09/21/2016, “USAID Projects Boost Ecological Mining, Honey Incomes for Antioquia Families”).

In addition, Mineros years ago banned the use of toxic mercury -- in sharp contrast to criminal and informal gold-mining operators.

What’s more, Mineros routinely restores any lands disturbed by its mining through various reforestation and wildlife conservation projects – unlike the criminal mining groups tied to guerrillas and “paramilitary” organizations that devastate tropical forests and wreck riverside habitats (see Medellin Herald 03/21/2017, “Mineros SA Boosting Environmental, Social Projects”).


Medellin and its neighboring suburbs expanded “pico y placa” driving restrictions on all conventional combustion-engine cars, trucks, buses and motorcycles to nine hours daily for the week of March 2-9, 2019, because of worsening air pollution.

The only personal transport vehicles exempted from such driving restrictions are electric cars, along with Medellin’s “Metro” electrified railcar system, the expanding “Metrocable” electric-powered aerial tram system, an incipient electric-powered roadway tram system, the upcoming expansion of pure-electric “Metroplus” electric buses this year, and free zero-emissions bicycles at Metro rail stations.

What’s more, Medellin debuted its first all-electric taxicab on March 3 -- right on the heels of the debut of the “Line M” Villa Hermosa-Buenos Aires aerial tram debut February 28.

“Line M,” serving 350,000 people in northeastern districts, is the fifth aerial-tram system now operating in Medellin, with a sixth coming in a few more months.

All these moves are further signs of the upcoming conversion to zero-emissions transport modes for Medellin -- and likely for many other global cities facing air-pollution problems.

On the taxi front, the “Tax Belén” cab company debuted its first BYD all-electric cab this month – exempt from “pico y placa” driving restrictions.

Medellin hopes to see as many as 1,500 electric taxis over the next few years, but the relatively high cost of acquisition compared to conventional gasoline-powered taxis is the key sticking point (see Medellin Herald 09/27/2018)

“Tax Belen, one of the largest taxi companies in Medellín with more than 2,300 cabs, will be in charge of operating public service cars, while BYD will provide after-sales service and will contribute its experience as one of the world’s leading manufacturers of electric vehicles,” according to BYD.

“Fuel savings compared to other combustion vehicles will be approximately 70% and operating costs will be 50% lower than natural-gas or gasoline taxis,” according to BYD.

BYD claims that range-between recharge should be around 400 kilometers and fast-charge stations can recharge the vehicle in 90 minutes.


Antioquia’s Crucial ‘Mar 1’ Wins Financial Close; Puerto Antioquia Wins Concession; Pacifico 1-2-3 Making Progress

Colombia’s Vice President Marta Lucia Ramirez announced March 20 that the “Mar 1” highway project linking Medellin westward to Santa Fe de Antioquia -- and eventually to new Atlantic ports -- just won a COP$2.23 trillion (US$754 million) financial close organized by the “Financiera de Desarrollo Nacional” (FDN) financing agency.

On a related front, Vice President Ramirez simultaneously announced that the long-awaited “Puerto Antioquia” ocean freight port near Turbo, Antioquia, just won a 30-year concession.

That US$300 million port project will include construction of new piers and docking facilities for up to-five ocean ships simultaneously; a four-lane divided highway linking the dock area to terminal facilities; and onward highway linkages to the new “Mar 1” and Mar 2” highways that should be completed over the next six years -- hence bringing Medellin much closer to relatively lower-cost global freight transport.

The new port will handle containerized cargo, highway vehicles, grains, plantains and bananas, according to project developer PIO Sas, in association with global shipping and port-operator Naviera Francesa CMA CGM S.A., plus major regional banana growers.

Civil works on the project will be undertaken by France-based Eiffage Infraestructuras de Francia along wth Colombia-based Termotecnica Coindustrial.

As for the “Mar 1” financial partners, these include Blackrock; the Interamerican Development Bank (IBD) and IBD Invest; CAF; ICO; the German Development Bank (KFW); Sumitomo Mitsui Banking; and France-based Société Générale

Mar 1 includes rehabilitation and operation of existing highway between Santa Fe de Antioquia and Peñalisa (71 kilometers); construction and operation of a second lane between Medellín and Santa Fe de Antioquia (43 kilometers); the construction and operation of a 4.6-kilometers-long, parallel tunnel (adjacent to the existing Tunnel de Occidente) linking Medellin westward toward Santa Fe de Antioquia; and the construction of 46 bridges.

Once completed, Mar 1 (and the connecting “Mar 2” project) will enable Medellin freight shippers and Colombian coffee exporters to tap a much quicker route to Atlantic ports in the Urabá region of Antioquia.

Today, vehicle transport from Medellín to Necoclí on the Atlantic ocean takes eight hours. But once Mar 1 and Mar 2 are complete, then transport time will be cut to four hours, according to Colombia’s Agencia Nacional de Infraestructura (ANI).

Construction companies in the Mar 1 project include Austria-based Strabag and its Swiss-based subsididary Strabag AG Switzerland (with 37.5% share); Sacyr (Sacyr Concessions Colombia and Sacyr Concesiones S.L.) with 37.5%, and Colombia-based Concay, S.A. with 25%.

Pacifico 1-2-3 Projects

On a related front, ANI president Louis Kleyn announced earlier this month that the 293-kilometers-long Pacifico 1-2-3 highways linking Medellin to other highways connecting to the Pacific port of Buenaventura continue to make progress -- although completion on “Pacifico 1” between Medellin and Bolombolo isn’t likely until around 2023.

Currently, freight trucks face a grueling, 15-hour-journey to-and-from Medellin to Buenaventura. But the new Pacifico highways would cut that to 10 hours, according to ANI.

Linking Medellin to the Pacific region on modern, four-lane highways -- including many new tunnels and bridges -- will generate “more international trade from the green mountains that connect southwest Antioquia and the coffee region,” according to ANI.

“The progress in the construction of this great corridor is the result of rigorous and disciplined management in social, environmental, property and contract areas, [along with] confidence generated by banks and investors, both domestic and foreign,” according to the agency.

“To date, Pacífico 1 -- the corridor connecting Bolombolo with La Primavera [Medelliin suburb of Caldas] has an execution of 15%, while Pacífico 2 (connecting Bolombolo to La Pintada) has achieved 64% execution, and Pacífico 3 (La Pintada to La Virginia in Risaralda) has advanced by 54%. These three projects total 119 fronts of active works,” according to ANI.

The works will efficiently connect the centers of inputs and production in the north of the country with the coffee zone, the Valle del Cauca and the Pacific Ocean, will benefit the producers and merchants of the departments of Magdalena, Atlántico, Bolívar, Córdoba, Sucre and Antioquia, in the decrease of travel times.

The department of Antioquia has 1,530 km of national road network, it has a strategic location, not only because of its size, but also because of the maritime and fluvial limits and especially the proximity to rivers such as Cauca and Atrato. Therefore, the 4G tracks that are built and those that will cross it are fundamental for the region, since they will promote social progress and become bridges of international trade.

Currently, the travel time of a truck loaded with cargo from Medellín to Buenaventura can take 15 hours, but with the construction of these projects it will be reduced to 10 hours. The time between Manizales and Medellín will also be reduced, from 4 hours and a half to 2 and a half hours, and from the municipality of La Virginia, in Risaralda, to Medellín, it will go from 5 hours 30 minutes to 2 hours 40 minutes, on average.


ISA 2018 results March 219

Thursday, 11 July 2019 17:34 Written by

ISA Full-Year 2018 Profits Rise 6% Year-on-Year

Medellin-based multinational electric power transmission operator and highways concessionaire ISA announced March 7, 2019 that its full-year 2018 net income rose 6% year-on-year, to COP$1.5 trillion (US$483 million).

Revenues also rose 4% year-on-year, to COP$7.2 trillion (US$2.3 billion), while earnings before interest, taxes, depreciation and amortization (EBITDA) grew 8.4% year-on-year, to COP$4.8 trillion (US$1.54 billion).

EBITDA margin came-in at a fat 66.5%, or 73% if excluding construction activities during 2018. Return on equity likewise came-in at a favorable 12.8%.

ISA credits the profit gains to “entry into operation of new projects in Peru, Colombia and Chile; the update for inflation of the [power] tariff cycle, the recovery of taxes and [tax deductions from] fiscal losses in Brazil, and lower taxes for the application of the Financing Law in Colombia,” according to the company.

As for fourth quarter (4Q) 2018 profits, ISA netted COP$581 billion (US$187 million), up 116% over 4Q 2017, according to the company.

In ISA’s electric power transportation unit, 4Q 2018 revenues rose 17.8%, to COP$187 billion (US$60 million).

“The variation is explained in Colombia, by the remuneration of the new projects such as the San Antonio Substation (230 kiloVolts) and associated transmission lines; the Ituango-Medellin Substation (Katíos) and the Caribbean Coast reinforcement (500 kiloVots); the Caracolí Substation and associated lines, the charge for connection to the network of the El Bosque transformer project, the extensions of the Nueva Barranquilla substation and the Ternera substation,” according to ISA.

Entry-into-operation of several new transmission lines in Chile along with higher power tariffs in Brazil also boosted revenues, according to the company.

Also in Brasil, ISA’s “Companhia de Transmissão de Energia Elétrica Paulista” (CTEEP) subsidiary completed its first emission of “green bonds,” which will finance “energy infrastructure projects with environmental benefits,” according to ISA

ISA’s highway concessions revenues in Chile dipped slightly in 2018 because of higher maintenance costs and an adjustment in accounts receivable, according to the company.

During 2018, ISA and its subsidiaries invested a total of COP$2.4 trillion (US$772 million) in power transmission, highway concessions, telecommunications infrastructure and technological developments.

What’s more, for the period 2019 through 2023, the company now projects estimated capex investments of COP$10.575 trillion (US$3.46 billion).

ISA’s corporate-wide net assets totaled COP$44.9 trillion (US$14.4 billion), up 3.6% year-on-year. The increase in assets incorporated “entry into operation of new projects in the electric energy transport business in Colombia, Chile and Peru,” as well as the incorporation of assets, profits and revenues from its “TAESA” and “IENNE” power businesses in Brazil, according to the company.


Gran Colombia Gold 2018 results March 2019

Thursday, 11 July 2019 17:33 Written by

Gran Colombia Gold, Continental Gold Post Net Losses for Full-Year 2018

Toronto-based Gran Colombia Gold (GCC) on March 27, 2019 posted a US$3.4 million net loss for full year 2018, down from a US$36.8 million profit in 2017.

“The net loss in 2018 includes $28.4 million of losses on financial instruments, primarily triggered by the extinguishment of the 2020 and 2024 debentures in the second quarter, and a $7.6 million charge for the costs associated with the offering completed in the second quarter of 2018,” according to GCC.

Net profits in 2017 included a reversal of a US$45.3 million impairment of its principal asset: the Segovia gold-mining operations in Antioquia.

For fourth quarter (4Q) 2018, adjusted net income rose to US$14.3 million, up from US$9.1 million in 4Q 2017.

The year-on-year improvement “reflected the favorable impact on income tax expense in the fourth quarter of 2018 arising from the Colombian tax reform measures announced in December 2018 that will see a further reduction in future income tax rates,” according to GCC.

Commenting on the results, GCC executive chairman Serafino Iacono noted that “2018 was a watershed year “ with gold production surpassing 200,000 ounces for the first time, up 25% from 2017, “as our high-grade Segovia operations delivered another solid year with [gold yield per ton of rock mined] at over 17 grams per ton.”

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose 36% year-on-year, “surpassing the $100 million mark for the first time, and being a key catalyst in the 58% increase in our operating cash flow to almost $80 million and the 72% increase in our free cash flow to $44 million,” according to Iacono.

“Our debt refinancing earlier in 2018 did exactly what we hoped for, lifting the dilution overhang off of our stock -- and we strengthened our balance sheet, increasing our cash and cash equivalents to $35.6 million, while reducing our debt by 37% to $88.3 million by the end of 2018,” he added.

Full-year 2018 revenues jumped 25% year-on-year, to US$268.5 million, “largely driven by the production growth and a modest improvement in realized gold prices to an average of $1,239 per ounce in 2018,” according to GCC.

“In 2019, revenue will benefit from lower charges in our new refining contract that the company entered into in January 2019 with an international refinery, saving as much as $20 per ounce sold. The company will also be paid faster under the new refining contract, a benefit to operating cash flow.”

Meanwhile, GCC expects its Segovia operations will produce between 186,000 to 199,000 ounces of gold this year, while its corporate-wide production should be in a range of 210,000 to 225,000 ounces, according to the company.

Continental Gold Results

As for Continental, this Toronto-based miner posted a US$31.6 million loss for 2018, more than the US$7.8 million loss in 2017.

The company’s main asset is its in-development Buritica, Antioquia gold mine, due for production start-up in 2021.

The bigger net losses in 2018 versus 2017 were the result of "increasing construction activities in each of the comparative years, net of financing proceeds received from the credit facility in 2018 and 2017; the issuance of shares in 2017 and 2016; and the transfer of collateral deposits to restricted cash in 2018," according to Continental.

Exploration expenses hit US$2.5 million in 2018 versus US$300,000 in 2017, mainly because of "initiation of exploration activities at the Berlin [Antioquia], Dojura [Choco] and southern Colombia [mining] projects in late 2017," according to Continental.


Estra 2018 results March 2019

Thursday, 11 July 2019 17:32 Written by

Industrias Estra Full-Year 2018 Profits Improve Year-on-Year

Medellin-based plastic container manufacturer Industrias Estra revealed in a March 28, 2019 filing with Colombia’s Superfinanciera corporate oversight agency that its full-year 2018 net income rose to COP$1.2 billion (US$379,000), up from COP$1 billion (US$316,000) in 2017.

Sales were flat year-on-year, at COP$68.9 billion (US$22 million), while earnings before interest, taxes, depreciation and amortization (EBITDA) dipped to COP$4.1 billion (US$1.3 million), down from COP$5.1 billion (US$1.6 million) in 2017.

The company’s sales and profits generally followed macroeconomic trends in Colombia during 2018, according to Estra. First-half 2018 sales were depressed by uncertainty over national elections, but consumer and industrial confidence rebounded when moderate-conservative Ivan Duque won the presidency over socialist-populist rival Gustavo Petro.

As a result, Estra’s second-half 2018 sales rose to COP$36.3 billion (US$11.5 million), up from $34.8 billion (US$11 million) in the comparable second-half of 2017.

Export sales were a bright spot for Estra, up 17% year-on-year, “thanks to the opening of new markets” including restoration of free-market policies in neighboring Ecuador -- due to the 2017 election of market-friendly President Lenin Moreno, who replaced vitriolic socialist-populist former President Rafael Correa.

In the Colombian domestic consumer-products market, Estra’s 2018 unit sales were flat year-on-year through its proprietary retail outlets, although average sales ticket grew. While industrial sales dipped 9% year-on-year, second-half 2018 industrial sales improved over the first half, the company added.


EPM hidroituango collapse study March 2019

Thursday, 11 July 2019 17:31 Written by

EPM: DESIGN FLAW CAUSED HIDROITUANGO TUNNEL COLLAPSE; RECOVERY UNDERWAY

Medellin-based multinational electric power giant EPM on March 1, 2019 unveiled a long-awaited consultant’s report on the causes behind the April 2018 tunnel collapse that has resulted in a three-year delay in power output from the 2.4-gigawatt “Hidroituango” hydroelectric plant in Antioquia.

“The results determine that the hypothesis of greater probability is that the obstruction of the auxiliary diversion tunnel (GAD) was due to the ‘progressive erosion of areas of weakness of the rock,’ located on the floor of the tunnel,” according to EPM, quoting the report from Norwegian-Chilean engineering consulting firm Skava Consulting.

“The zones of weakness of the rock were not treated properly, due to a deficiency in the design during the advisory stage,” which was undertaken by Ituango Generation Consortium (Integral - Solingral),” according to EPM’s summary of the study.

A full copy of the study is available here: https://www.epm.com.co/site/estudio-causa-raiz-hidroituango

“The study, which employed scientific methods, was only aimed at analyzing the root cause of a specific event: the plugging in the auxiliary diversion tunnel (GAD) structure that had been in operation since September 2017,” according to EPM.

For the Skava report, seven German, Swiss and Chilean engineers with more than 25 years experience undertook a geotechnical engineering study tapping their expertise in tunnels and dams, in rock engineering, in geology and hydrology, and in civil engineering for mining projects, metering systems and hydroelectric power plants, according to EPM.

“The auxiliary GAD diversion tunnel, which was supposed to operate temporarily, was planned from the end of 2013 -- when the original diversion tunnels were still under construction -- as an alternative that would avoid an additional delay of one year or more in the construction of the main works,” according to EPM’s summary.

When EPM took over the project via a build-own-operate-maintain-transfer (BOOMT) contract in March 2011, “the project schedule already had considerable delays, which could affect [Colombia’s] energy supply,” the company noted.

“The results of this study do not impact the recovery process of the project, in which we continue to work tirelessly. The Ituango hydroelectric project advances in its recovery and in the reduction of risks for people living below the main works.

“If everything progresses as planned, it will contribute electric power [to the national grid] from the year 2021,” EPM concluded.

Blame Games Begin

Meanwhile, a host of Colombia regulatory agencies have already begun piling-on accusations against former EPM and Hidroituango officials over the tunnel collapse and the inevitable economic impacts on consumers and the city of Medellin, which gets 25% of its annual revenues from EPM.

The three-year delay in lost power sales, plus clean-up and reconstruction costs, likely will add at least US$1 billion to the original US$4-billion to US$5-billion cost estimate for the project.

Colombia Attorney General Nestor Humberto Martinez announced February 27 that he’s planning to bring charges against former Hidroituango SA manager Luis Guillermo Gómez Atehortua, and former EPM-Ituango manager Luis Javier Vélez Duque for alleged failure to meet legal contract requirements.

In addition, Martinez announced that he’s also considering bringing charges against six other former officials connected to the project, including former EPM E.S.P. manager Juan Esteban Calle Restrepo and former Hidroituango project board members Ana Cristina Moreno Palacios, Hugo Alejandro Mora Tamayo, Juan Felipe Gaviria Gutiérrez, Jesus Arturo Aristizábal, and Maximiliano Valderrama Espinosa.

The Attorney General’s investigations focus on the project contracting process and environmental damage arising from construction and the subsequent tunnel collapse in 2018.

The Attorney General stated that preliminary investigations have discovered “improper management of solid waste” that “had a negative impact on natural resources with effects such as the quality, quantity and fluidity of the water; the erosion of the soil and the eventual instability of the mountain” adjacent to the dam.

“During the execution of the project there were contingencies that would have been rejected by those in charge of the project, who would not have had the capacity to attend them because they were prepared for a situation of lesser dimension,” according to the Attorney General.

The Attorney General’s investigation has “identified alleged inconsistencies from the beginning of the project as alleged anomalies in the pre-contractual phase and alleged deficiencies in the execution of the contracts, the studies of design and execution of the work, as well as in the additions authorized to the signing contractor,” according to Martinez.

In response to the allegations, EPM issued a statement saying that it has “acted transparently and within the framework of what the law allows. The company reiterates its permanent disposition to collaborate with the Attorney General’s Office in its investigative process, and with all the control entities that are [regulating] the Hidroituango project, as it has done so far.”

CGR Probe

A parallel investigation now underway by Colombia's Controller General of the Republic (CGR) finds that to date, the cost of the Hidroituango project is close to COP$11.5 trillion [US$3.7 billion], "of which 38.23% (more than COP$4.3 trillion/US$1.4 billion) correspond to EPM's own resources. The remaining 61.77% comes from debt with multilateral banks, equivalent to almost COP$7.1 billion [US$2.3 billion].

"The CGR will estimate the additional costs that will be generated in the future due to deficiencies and adverse situations that have arisen during the planning and development of the project," according to the agency.


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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.

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

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Medellin Herald: Find news, information, reviews and opinion on business, events, conferences, congresses, education, real estate, investing, retiring and more.
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  • Medellin, Antioquia, Colombia

Medellín Photo Galery

Medellin, contrasting colors and styles by Gabriel Buitrago

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