Saturday, September 21, 2019

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EPM general manager Jorge Londoño de la Cuesta revealed in a September 17 press conference here in Medellin that insurer Mapfre just issued a letter of coverage worth trillions of Colombian pesos for damages at the under-construction, US$5 billion Hidroituango hydroelectric plant in Antioquia.

The exact amount of payment won’t be known for months, as a technical panel must now prepare a detailed, itemized report on the exact value of each area of the dam works and machinery damaged by a diversion tunnel collapse last year, Londoño explained.

While EPM has insurance coverages totaling about COP$8 trillion (about US$2.5 billion) for physical damages as well as US$628 million for lost power sales, EPM likely won’t be getting the maximum amount, as the damages (as roughly estimated to-date) probably will come-in at below that total, he estimated.

EPM expects that the first sales of power from Hidroituango will be in December 2021, rather than the initially planned start-up in December 2018 -- a date that was forcibly postponed by the April 2018 tunnel collapse.

So, until the company has an exact startup date -- and an exact market quote for Colombian power prices matching that start-up date -- it can’t yet quantify the value of the insurance coverages for lost and delayed Hidroituango power sales. But the payment likely will be less than the US$628 million policy-coverage maximum for lost power sales, he estimated.

“The positive response of the insurer to the efforts made by EPM to obtain the coverage for the incident was based on the investigations and findings advanced by the insurer autonomously, which concluded that the cause of the contingency is framed in the terms and conditions of the policy and therefore we will have coverage,” Londoño said.

“In this sense, once the value of the incident has been quantified, and taking into account the conditions and limits established in the insurance policy, the [insurance payment] resources will be reimbursed to EPM and will enter into the financial statements of the project.

“It is important to highlight that the insurer appointed a series of national and international experts including engineers, geologists and geo-technicians specialized in dams and underground works, as well as lawyers, among others, to review the technical information of the main fronts of project work including tunnels, caverns, dam and landfill. Likewise, they reviewed the designs, plans, technical specifications, construction processes, work logbooks, risk matrix and pre- and post-contingency studies.

“The work of this group of experts also included 12 visits to the project, multiple meetings and in-depth interviews with the EPM technical team, the main contractors and the board of experts,” he added.

The letter from Mapfre confirming insurance coverage for Hidroituango is a huge step forward, because “if we’d done something wrong, then they wouldn’t agree to pay us” for damages, he explained.

“The causes of the [tunnel collapse] are covered by this policy. This was an unpredictable accident, not negligence,” Londoño added.

“Now we’re entering the second phase, where the experts will adjust the amount of payment and determine when they pay. This involves a detailed inventory of all the damages and the value of each,” up to a maximum US$2.5 billion in insurance coverage for physical damages.

Medellin Mayor Federico Gutierrez added at the press conference that the insurance coverage announcement not only is good news for EPM but also for the city of Medellin, which gets about 25% of its annual revenue from the city-owned utility.

Chile Asset Sales

On a related financial front, EPM announced September 17 that it inked a US$138 million sale of its Chile wind-power unit to AES Gener SA and its Norgener Renovables SpA subsidiary, following a plan announced last year to sell “non-strategic” assets -- aiming to boost liquidity as a result of the Hidroituango project delay.

Combined with EPM’s continuing sale of its 10% stake in shares of Colombian power transmission giant ISA, its sale of Chile assets, its successful US$1.3 billion bond sale this year, and now the upcoming multi-trillion-peso Hidroituango insurance payment, EPM’s financial outlook has improved dramatically when compared to market worries in the aftermath of the Hidroituango tunnel collapse last year, Londoño added.

 


Big corporate fleets in and around Medellin and across Colombia increasingly are turning to sophisticated vehicle technologies in order to avoid accidents, cut fuel costs, avoid merchandise damage, monitor driver behavior and improve routing.

Among local fleets employing and/or evaluating novel “Mobileye” and “Ituran” systems are insurance giant Sura, cement maker Cemex, supermarket leader Exito and soft-drinks maker Postobon.

These advanced vehicle/driver/road-status technologies -- created and developed in Israel -- are being marketed in Colombia by Medellin-based Eletech SA.

In an interview with Medellin Herald, Eletech SA operations director Victor Meir Avraham explained the evolution of these technologies -- and their growing applications here in the Colombian market.

While many Colombian fleets employ relatively simple global positioning system (GPS) technologies to track individual vehicle movements, the Mobileye and Ituran technologies go far beyond those.

The more-advanced technologies incorporate sophisticated cameras, warning lights-and-sounds, facial recognition technology (detecting driver distraction and drowsiness), two-way telecom systems for emergency communications, and computer programs that automatically digest and analyze vast amounts of crucial data for relatively easy fleet-management evaluations of driver and vehicle behavior.

Bringing advanced Israeli technology to the Colombian fleet-vehicle market has proven to be a “perfect match” -- with huge growth opportunities on the horizon, Avraham explained.

Mobileye – bought by U.S. computer-technology giant Intel in 2017 for US$15.4 billion (the biggest-ever corporate acquisition in Israeli history) – gave Intel a key entryway into the vast global vehicle market, including the futuristic “autonomous vehicle” business, Avraham said.

The Mobileye technology being offered in Colombia can be used by any sort of vehicle, including cars, trucks, buses and motorcycles, he said.

Mobileye systems for distracted-driver alerts include lane-departure warning, headway monitoring and warning (to avoid tailgating and rear-end crashes), pedestrian collision warning, speed-limit detection and warning, and driver fatigue warnings, he showed.

In-development is a newer Mobileye system that eventually will detect and report potholes in roads, broken traffic lights and other highway infrastructure problems – following which these detections will be sent wirelessly to government highway departments, in real time. The same system eventually will create highway mapping systems that will be useful for the next generation of autonomous vehicles, he added.

Ituran: Telematics, Fleet-Management Analysis

While Mobileye is a stand-alone system on the vehicle, Eletech pairs it with Ituran technology, which (among various features) enables fleet managers to analyze driver and vehicle operations, with dozens of possible plug-in options.

Among the systems that can be run by Ituran is a “pin-type” keyboard that enables recognition of each individual driver of a fleet vehicle.

Yet another system -- termed “safety” -- is like an airplane “black box” that can record all safety issues, accidents and even automatically call the fleet manager operations center to report an accident (if for example the driver is knocked unconscious and hence unable to call).

Another aspect of this technology is a loop-cycle camera system that records what happened inside and outside a vehicle immediately before and after an accident. Those recordings, automatically uploaded to the cloud, can be useful for determining fault in any accident.

A plug-in cell-phone system also can be incorporated for hands-free, two-way communications between the driver and fleet management.

Yet another novel option is a cargo-bay thermometer system for refrigerated transport, which alerts the driver and fleet management of temperature anomalies that could damage goods in transit. This is especially useful for food and dairy transporters, for example.

Another system records fuel consumption, oil consumption and vehicle refueling behavior that can detect poor driving habits -- or possible diversion of fuel into a portable fuel container or another vehicle.

Yet another technology feature issues a mild warning sound for a moderate excess of vehicle speed, and a harsher sound for greater excess speed -- combined with an “eye flash” camera that monitors traffic cameras so that the fleet can avoid costly speeding fines.

The telematics system in these technologies enables a fleet manager to monitor every vehicle in real time, as well as to receive periodic, automated reports on driver and vehicle behavior, including reckless driving, excessive stop-times at pickup/delivery points, questionable refueling, prohibited stops, prohibited routes or prohibited openings of cargo doors.

“Ituran is ‘big data,’ what many call the ‘new gold,’” Avraham explained. “This is what differentiates Israeli technology” from other competitors, he added.

“Every vehicle can generate 10 gigabytes of data each month – every braking event, every acceleration, every turn, every speed, every traffic violation. But most of that is too much data” for practical fleet-manager evaluation.

“So, Ituran turns that 10 gigabytes into 40 or 50 megabytes of useful data, sent to the cloud. Not many companies can do this; it’s high-level telematics and analysis.”

For example, the recent “Vision Zero” pedestrian-accident-reduction initiative (in Europe and especially in Sweden) has been a “huge success” because of telematics analysis, he said.

These technologies gather and analyze city-wide accident data, by day and time-of-day -- and then show the high-risk areas on a computerized, interactive map, so that fleet managers can help design routes to avoid such high-risk areas at certain hours.

These technologies also identify the highest-risk and lowest-risk drivers among the fleets, by automated scoring systems showing which driver too-often drives at excessive speed, or tailgates, or aggressively brakes and steers.

The end-result: computerized “report cards” on each driver, with “green,” “yellow” and “red” computerized colors used to indicate good, mediocre and dangerous behavior. Such reports can help managers coach drivers on better behavior -- and if coaching doesn’t work, then justifiable firings can result.

Since some fleets may employ dozens or hundreds of drivers, such a computerized system can vastly improve over-all fleet operations-- and save vast amounts of management time by enabling early detection of driver-behavior trends that could lead to costly safety problems later.

On a related front, a cell-phone application available with the Ituran telematics system not only enables fleet managers to monitor and evaluate fleet-vehicle drivers, but also could enable individual car owners (such as a parent loaning a car to a son or daughter) to monitor behaviors.

Such technology is already being used in fleet applications here, but it could spread to the general population in future.

Eventually, the Ituran system also potentially could help bring about “usage-based insurance” (UBI) for individual car drivers here --still a novel concept in Colombia, in contrast to its common usage in North America, Europe, Israel and elsewhere, he said.

Colombian car insurance typically is based upon the vehicle value rather than the driver’s actual behavior, he said. In contrast, UBI analyzes personal driver risk, which could prompt insurance companies to offer premium discounts to good drivers, or penalties for poorer drivers.

“We’re trying to implement this with Sura in Colombia – it’s a six-month project, to see what best fits Sura needs for Colombian conditions” for individual car drivers, Avraham said.

“This would revolutionize Colombian transport if it applies to individual car drivers, and not just fleet vehicles,” he added.

 


A growing list of major local and international companies operating in and around Medellin and throughout Colombia are turning to a novel “Portafolio Verde” (“green portfolio”) consultancy here for projects that are both “green” environmentally as well as financially.

“Portafolio Verde” finds, designs and jump-starts innovative, sustainable environmental and social projects -- some of which can serve as legally required “offsets” to environmental impacts from certain industrial developments.

In a presentation to the recent Proantioquia forum here on sustainable development, Portafolio Verde executive director Alejandro Zapata cited numerous such projects over the 14-year history of the organization.

Among the newest projects are under the umbrella of Portafolio Verde’s one-year-old “Animal Bank” initiative.

“Animal Bank” helps find, develop and finance -- tapping corporate or individual-donor seed money -- suitable biodiversity projects, and then helps train local people and organizations to continue executing such projects.

Also under the “Animal Bank” umbrella is the “Tierras Con Proposito” (“Lands with Purpose”) program, which finds and then matches willing landowners with corporations seeking suitable environmental-impact “offset” projects.

“Through Animal Bank, we seek to support projects focused on conservation and biodiversity, in this way supporting social, environmental and economic development in our region and in our nation,” Zapata explained in his Proantioquia presentation here.

Candidate lands for “Tierras Con Proposito” must have biodiversity and conservation potential.

Such lands would (for example) host natural springs or wetlands; serve as “buffer zones” adjacent to environmentally protected areas; have some strategic importance such as location in highland paramos or tropical dry forest; serve as homes to threatened flora and fauna; and have potential for hosting sustainable forestry, animal husbandry, beekeeping or similarly non-destructive activities on part of the land.

Following Zapata’s Proantioquia presentation, Animal Bank and “Tierras Con Proposito” coordinator Carolina Castaño Restrepo explained to Medellin Herald in a follow-up interview many of the key underlying principles and mechanisms involved in such projects.

If for example some company proposes to develop an industrial or mining project on certain lands that are now legally declared as environmentally sensitive, then Animal Bank would help find a matching, privately-owned parcel somewhere else that either will be purchased by the corporation -- or else extended some type of finance or incentives for “green” preservation or restoration -- of some-or-all of the parcel.

Unless the land is purchased, the original owner could still keep the land -- but then avoid any sort of environmental damage such as logging, mining, cattle grazing or industrial development on specified, dedicated acreage – at very least during the term of the restoration or preservation contract.

In this sort of transaction, Animal Bank could earn a commission on what might be considered something like a real-estate deal. But there’s a difference: the main driver to the transaction is environmental protection rather than conventional “use” of an “offset” property.

“Tierras Con Proposito” could include lands that (for example) currently are partly dedicated to farming or ranching, but with at least part of the land in a natural state -- hence aiding biodiversity and environmental conservation.

One such land cited on the Animal Bank web-site is a former cattle ranch near El Retiro, Antioquia, now considered as having potential for eco-tourism. Another property historically dedicated to ranching in San Pedro de los Milagros, Antioquia, is listed on the web site for potential preservation of native forest and water resources.

While this particular parcel in San Pedro de los Milagros isn’t specifically identified on the Animal Bank web-site as a potential site for conservation of the endangered Antioquia Brush-Finch (Atlapetes Blancae) bird, it’s notable that there is now an extraordinary potato farm near San Pedro de los Milagros that just started offering birdwatching-ecotourism, with high probability of seeing this extremely rare bird at this specific site.

Other potential projects cited on the Animal Bank web-site – but looking for matching partners -- include conservation of the endangered Blue-Billed Curassow (Crax Alberti) bird as well as the endangered Andean Condor (Vultur Gryphus).

Meanwhile, a successful freshwater-turtle conservation/ecotourism project in Cocorna, Antioquia – with project design and management training provided by Animal Bank – has won financial aid from Medellin-based Grupo Argos, a multinational corporate giant in cement, electric power and highway/airport concessions.

Other founding allies of Animal Bank include Canada-based, environmentally responsible gold miner Continental Gold (developer of Colombia’s biggest new gold mine in Antioquia); the “Renting Colombia” vehicle-leasing division of Medellin-based banking giant Bancolombia; Vanderbilt University (USA); Turner Family Center for Social Ventures (USA); and corporate social-responsibility advisor B Lab (USA).

To date, "Tierras Con Proposito" has already registered 150,000 hectares of various farms and ranches in Colombia -- all ready for matching with a suitable corporate project development for environmental “offsets” or (in some cases) possible ecotourism projects.

What’s more, based on projections from the growing popularity of the program, “Tierras Con Proposito” aims to grow to a staggering 11 million hectares registered-and-ready over the next five to 10 years -- all over Colombia -- according to Portafolio Verde executive Alejandro Zapata.

Interested parties in Animal Bank and Tierras Con Proposito potentially could include all sorts of investors (not just big corporations), as program coordinator Carolina Castaño explained to us.

For example: A company, individual or an organization might be interested in developing an ecotourism hotel at a candidate site. Tapping its database, Animal Bank wouldl analyze the proposal and search for a potential, suitable site, which would include follow-up verification of the actual status of flora and fauna for possible ecotourism.

Individuals also can contribute to Animal Bank, as for example through the allied “100 Apasionados por la Fauna” group. Animal Bank asks such individual donors to contribute at least COP$3 million (about US$875 at current exchange rates) per year.

The organization also continuously employs social media, public events and news-organization interviews in order to reach-out to more landowners interested in registering their properties, as well as companies, corporations and individuals interested in collaborating on its many-varied projects.


Medellin-based multinational paper products and personal-hygiene specialist Grupo Familia revealed in an August 20 filing with Colombia’s Superfinanciera corporate oversight agency that its first half (1H) 2019 net income rose to COP$126 billion (US$37 million), up from COP$98 billion (US$28 million) in 1H 2018.

Gross revenues also rose, to COP$1.28 trillion (US$374 million), from COP$1.14 trillion (US$333 million) in 1H 2018. Operating earnings likewise rose to COP$190 billion (US$55 million) versus COP$153 billion (US$45 million) in 1H 2018.

As for second quarter (2Q) 2019, gross revenues rose to COP$667 billion (US$195 million) versus COP$578 billion (US$169 million) in 2Q 2018, while operating earnings rose to COP$88 billion (US$25.7 million) versus COP$73 billion (US$21 million) in 2Q 2018.

Net income climbed to COP$56 billion (US$16 million) in 2Q 2019 versus COP$44 billion (US$13 million) in 2Q 2018, the filing shows.

Commenting on the results, Familia general manager Andrés Gómez Salazar cited “solid growth” in 2019 sales based in part on the launch of new products including a novel four-ply “Expert” toilet paper, “AcochaMax” kitchen towels, “Premium Touch” baby diapers and “Buenas Noches” feminine-hygiene napkins.

Grupo Familia markets its products in 20 Latin American/Caribbean countries and has its principal factories in Medellin and Rionegro, Antioquia; two other plants in Colombia; two more plants in Ecuador and single factories in Argentina and the Domincan Republic.


Medellin-based socially responsible gold miner Mineros SA announced that its second quarter (2Q) 2019 net income fell 41% year-on-year, to COP$11 billion (US$3.2 million).

“The decrease in net income is mainly explained by an increase in financial expenses -- close to COP$6.6 billion (US$1.9 million), derived from the acquisition of Gualcamayo [mining in Argentina], as well as [currency] exchange [costs] on the order of COP$3.7 billion [US$1.07 million) and higher exploration expenses” for proposed mining projects in Argentina and Chile, according to Mineros.

On the other hand, earnings before interest, taxes, depreciation and amortization (EBITDA) rose 47% year-on-year, to COP$94 billion (US$27 million). EBITDA margin for the latest quarter rose slightly, to 31.5%, compared to 31.1% in 2Q 2018, according to Mineros.

Revenues also rose 45% year-on-year, to COP$298 billion (US$$86.7 million), “explained by a 30% increase in production due mainly to the new ounces from our [recently acquired] operations in Argentina, at an 11.8% higher sale price of gold” as measured in Colombian pesos, according to the company.

Operating costs also rose 55% year-on-year, hitting COP$235 billion (US$68 million), “due to the operating costs (about COP$75 billion/US$22 million) in Argentina that did not exist in the prior year, as well as greater purchases of mining material in Nicaragua [at COP$9.3 billion/US$2.7 million],” according to Mineros.

Gross profit for 2Q 2019 grew 17%, reaching COP$63 billion (US$18 million), with a margin of 21.2%, versus COP$54 billion (US$15.7 million) with a margin of 26.3% in 2Q 2018.

Gold production rose 30% year-on-year, of which Colombia accounted for 15,172 ounces, while Nicaragua contributed 31,610 ounces and Argentina contributed 23,935 ounces.

Full-year 2019 gold production is now estimated in the range of 280,000 to 300,000 ounces of gold equivalent, with “expectations that gold prices continue with high volatility and with an upward tendency,” according to the company.

Colombia Permit Update

Regulatory permitting delays had been holding-up expansion of Mineros' environmentally responsible alluvial mining in Antioquia, although “we have made some progress,” according to Mineros.

The company recently won permit approval from the Forest Directorate of the Ministry of Environment, following an environmental study on possible impacts on epiphytic species. The company also eventually convinced Corantioquia to lift a prior ban on riverbank mining.

On another front, Mineros recently completed a required impact study for Colombia’s national environmental licensing agency (ANLA) for some proposed logging near a mining site. Then, in an August 16 filing with Colombia's Superfinanciera corporate oversight agency, Mineros announced that it has finally won crucial ANLA approvals. 

"Mineros S.A. informs the market that via 'Resolución No. 01612' of August 15, 2019, ANLA resolved our request to modify the environmental management plan for our alluvial operation, unifying some of the resource-use permits," according to the company announcement. 

"Through this modification it is [now] possible to continue our alluvial operation, which had been restricted because of delays in obtaining permits," the company added. 


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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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