EPM Eyes Dramatic Expansions into Infrastructure, Services, Advanced Technologies

Medellin Mayor Daniel Quintero and EPM General Manager Alvaro Rendon revealed in a July 2 filing with Colombia’s Superfinanciera oversight agency an eye-popping proposal that would dramatically expand EPM’s product-and-service offerings nationwide and internationally.

Already Colombia’s biggest single energy producer and Medellin’s single-biggest financial contributor, EPM and the city of Medellin now jointly propose that EPM enter into a mind-boggling array of businesses, according to “Proyecto de Acuerdo Numero 19 de 2020,” presented to the Medellin City Council and published by Superfinanciera.

According to the Superfinanciera filing, potential new EPM business lines include:

1. Participation in highway and subway infrastructure development. “EPM will seek to enter the infrastructure market for the construction of public service networks, highways and underground metro lines . . . taking advantage of an opportunity to participate in a market that will grow exponentially in coming years,” according to the document.
2. Commercialization of biosolids from wastewater treatment, including fertilizers.
3. Data marketing — tapping its vast information-collection activities from all sorts of customers.
4. Production and/or sale of solar panels, wind turbines, geothermal power systems, energy storage devices, and customer energy-to-grid schemes (as from local solar- or wind-power generation).
5. Construction consulting on sewage-treatment plants; sanitary landfills, waste transfer stations and utility service networks.
6. Supply, installation and maintenance of home appliances; energy-saving lighting systems; water-saving kits; and energy-management systems.
7. Business-to-business and business-to-customer services such as installing, cleaning, repair and maintaining appliances; used equipment disposal; and advice on use of new technologies.
8. Tourist services at its numerous forest reserves and water reservoirs, including environmental education services.
9. Treatment and renovation of specialty oils used in electric-power equipment and transformers.
10. Maximization and monetization of EPM-owned lands that are no longer used for EPM operations. Intelligent repurposing of such lands not only could prevent illegal squatting and subsequent ill-use, but also generate new income for EPM.
11. Development of new lines of business via strategic alliances, investments in other companies, and creation of new companies — in initiatives such as land management, construction of energy projects and water projects.
12. Use drones to deliver customer bills or other mail, as well as to monitor the status of electricity infrastructure.
13. Offer new products and services to third parties for any type of energy.
14. Offer different qualities of water for various uses.
15. Offer all types of combustible gases, different biofuels, electric recharge stations and home recharge installations for electric vehicles.
16. Expand offerings of information and communication technologies.
17. Offer shared services to companies, such as billing, hiring and payroll.
18. Offer technical services for upgrade of lands for irrigation, drainage and inundation protection.
19. Develop financing and insurance-related services for various projects.
20. Produce, commercialize, install, rent and/or operate solar panels or other types of distributed generation.
21. Market self-generation products and energy-storage systems.
22. Develop and supply energy-production systems for rural zones not connected to power grids.
23. Bring consultation services for energy efficiency (Energy Service Companies).
24. Offer advice and installations for district heating and cooling, as well as public-lighting services.

According to the Superfinanciera filing, entry into any of these new lines of business or partnerships mustn’t violate any existing debt/bond obligations that EPM has with Colombian or international financiers.

The filing warns that if EPM were to fail to comply with any of these provisions, then its debt contracts could go into “cross default,” which could harm all its other debt contracts and potentially trigger mandatory prepayment of debts that currently total some COP$13 trillion (US$3.56 billion).

In addition, failure to comply with existing debt covenants — potentially arising from participation and investment in new lines of business — could lead to prepayment penalties, loss of credibility with creditors, higher future interest-rate payments and stiffer future debt provisions, the filing warns.

None of the faculties conferred to EPM and the Mayor of Medellin through the proposed accord “can be interpreted or extended to decisions related to the sale of company activities, privatizations, mergers, spin-offs or operations different than modification of [EPM’s main public-utility] social object, nor for administrative restructurings that would suppose an elimination of administrative authority or loss of employees,” according to the filing.

“In development of these [new business-line] faculties, the Mayor can exclude activities that are incompatible or inconvenient to the commitments that EPM has subscribed with its financial creditors,” the document adds.

While the “Acuerdo Numero 19” document would indeed enable dramatic expansion of EPM business activities into new areas, the document also warns that corporate failure-to-evolve with changing markets could be disastrous.

“With the emergence of new technologies, the evolution of new tendencies in domestic public services, the pressures of markets and the greater demands of interest groups, public service companies [such as EPM] are obliged to widen their fields of action, or else lose their place and put at risk their sustainability,” according to the document.

Risks include “loss of competitiveness against other agents that are authorized to offer new products and services” as well as “possible obsolescence due to the lack of new products and services” and “possible deterioration in the value of the company and as a consequence, possible declines in profit transfers to the city of Medellin,” the document concludes.