Existing Hidroituango Contractors Might Continue into 2022 if Comptroller Delays Finalizing Proposed COP$4.3 Trillion Fine

EPM general manager Jorge Andres Carrillo revealed in a press conference here this morning (October 27) that it’s at least theoretically possible that the current Hidroituango construction contractors might continue their work well into 2022.

But that possibility of a temporary contract extension into 2022 remains to be confirmed, pending results of a follow-up meeting with the CCC Hidroituango consortium next week, Carrillo explained.

The driving factor is the expectation that Colombia’s Comptroller-General eventually will confirm its proposed COP$4.3 trillion (US$1.15 billion) fine against the construction contractors, part of a group of 26 individuals, companies and politicians named in the Comptroller’s lawsuit.

If the Comptroller confirms its charges, then the current contractors must abandon the Hidroituango project, under Colombian law.

However, the Comptroller’s expected final ruling is currently blocked by a 29th Circuit Court decision in Bogota, which arose from a counter-claim brought by one of the 26 defendants. That defendant is María Eugenia Ramos Villa, a former official in the administration of prior Antioquia Governor Sergio Fajardo.

Fajardo, along with the construction contractors and other former politicians, faces the same Comptroller allegations of “gross negligence” that supposedly caused a costly diversion-tunnel collapse at Hidroituango in 2018.

If however the Comptroller succeeds in overturning the 29th Circuit Court ruling before the December 31, 2021 expiration of the current Hidroituango construction contracts, then EPM will have to rush to seek replacement contractors — with potentially enormous costs from resulting construction delays.

Such delays potentially could wind-up costing EPM hundreds of millions or even billions of dollars, if expected counter-suits by the sacked contractors eventually prosper in some future court proceedings.

Since EPM has long expected that the Comptroller’s proposed fines eventually would be confirmed, Carrillo revealed that EPM has been working for more than one-year on a “plan B” to find replacement contractors.

So far, seven potential companies have shown relatively keen interest in bidding, but signing contracts with any such replacements will take many months, via a complex public-bidding process, he clarified.

Meanwhile, in a filing with Colombia’s Superfinanciera oversight agency this morning, EPM revealed details of last night’s (October 26) meeting with the CCC Hidroituango Consortium, where the parties explored alternative schemes that potentially could reduce construction delays from an eventual switch of contractors.

However, in that meeting, the Consortium flatly rejected the idea of assigning their existing contracts to some new contractors.

Instead, EPM and the Consortium will try to come-up with some interim scheme whereby the contractors supposedly would continue building Hidroituango for some months in 2022 while (somehow) also cooperating with EPM’s replacement contractors – that is, assuming that the Comptroller’s final ruling will indeed be adverse to the existing contractors, and that this ruling isn’t quickly overturned by some other court proceeding.

On another front, the majority owners of the Hidroituango project – that is, the Antioquia departmental government and its development agency, IDEA – unveiled an October 26 letter to EPM, demanding that EPM pay any and all costs of switching contractors.

This could wind up costing EPM hundreds of millions of dollars on top of all the other potential costs of switching contractors, including the possibility of insurance claim denials and possible loss of US$450 million in finance from the Interamerican Development Bank (IDB).

What’s more, continuing delays in finishing the Hidroituango project theoretically could provoke an eventual, catastrophic event at the dam, since the spillway – currently handling the entire Cauca River flow – wasn’t designed specifically to handle such massive flows indefinitely, according to the departmental government’s complaint.

Despite all these threats, Medellin Mayor Daniel Quintero this morning stated in a separate press conference that while EPM will continue to seek new contractors and pursue claims against Hidroituango project insurer Mapfre, the insurance policy wouldn’t cover costs for some unplanned diversion tunnels, some costly reinforcement works, portions of four-years of lost power sales, nor about US$200 million in deductibles.

As a result, the Mayor will continue with its parallel US$2.35 billion lawsuit against the contractors, in a separate proceeding to the Comptroller claims, he said.