EPM, Construction Contractors in Conciliation on US$2.6 Billion Losses from Hidroituango Tunnel Collapse in 2018

Medellin-based electric power giant EPM announced August 10 a new conciliation process with the “Hidroituango” design and construction contractors to resolve an estimated US$2.6 billion in losses resulting from a diversion tunnel collapse at the hydroelectric dam project two years ago.

The conciliation process aims to avoid a lengthy court battle over damage claims at the 2.4-gigawatt, US$5 billion Hidroituango project, according to EPM. The first generation units at Hidroituango are now expected to go on-line in 2022 — delayed by more than four years.

Hidroituango project insurers Suramericana and Chubb Insurance are also involved in the proceeding, according to EPM.

The decision to enter conciliation follows a “root-cause study by the international specialized firm Skava Consulting and a meticulous review of all the documentation in legal matters,” according to EPM.

Those studies found that the Hidroituango design consortium (Integral and Solingral SA), the “CCCI” construction consortium (Camargo Correa, Conconcreto and Coninsa-Ramón H) and the consortium controller (Ingetec-Sedic) alarmingly had discovered “problems to correctly comply with the ‘milestone of entry into commercial operation of the generation units,’” according to EPM.

To overcome the estimated start-up delays, “recommendations, decisions and actions that were taken brought with them a risk which ultimately led to the collapse of the auxiliary diversion gallery (GAD) and forced unprecedented management of the environmental, social and infrastructure risks inside the [damaged] transformer cavern,” according to EPM.

As a result of the tunnel collapse, EPM not only suffered losses to internal dam infrastructure, expensive power generation equipment, damage to downstream buildings, bridges and compensatory payments to downstream populations temporarily dislocated, but also massive financial losses in delayed power sales, financial interest, lost profits and offsetting payments to Colombia’s power grid as ordered by the national CREG energy regulator.

“Before going to court and raising the claim for COP$9.9 trillion [US$2.6 billion] against the consortia, EPM must exhaust the requirement of conciliation with those involved,” according to EPM.

“This process will take three months and its maximum duration will be until November 10. In the event that conciliation fails, the administrative litigation jurisdiction, headed by the Council of State, will be the one to settle the economic controversy between EPM and the consortia. In the event that conciliation is not achieved, this would be the biggest lawsuit filed by a public law entity against any contractor in Colombia.”

To oversee conciliation, “EPM requested the participation of the [Colombian] Attorney General, the Office of the Comptroller General, and the Agency for Legal Defense of the State. A delegated attorney will be in charge of coordinating the conciliation between the parties in dispute within the three months following the filing,” according to the company.