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Written by July 28 2021 0

Medellin electric power giant EPM announced today (July 28) that its Board of Directors voted to reject a proposed swap of the departmental government of Antioquia’s majority share in the (estimated) US$5 billion Hidroituango hydroelectric project -- in exchange for giving Antioquia a minority share in EPM.

The EPM Board “analyzed the proposal of [acting] Governor of Antioquia Luis Fernando Suárez Vélez to sell to EPM the 52.88% participation share of the [Antioquia] government and [its development subsidiary] IDEA in the Hidroituango Hydroelectric Society,” EPM announced in a press release.

“The Board concluded that it is important for [EPM] to continue with the working groups in charge of the issue, since it considered the possibility of EPM being able to buy said participation of great interest.

“However, the Board of Directors did not see the proposed form of payment [that is, the share swap] presented by the Antioquia government and instead proposed that payment through ordinary resources be studied within the negotiating tables,” EPM added.

In the meantime, “the department of Antioquia -- always close to the heart of [EPM] -- will see between 2021-2024 investments by EPM amounting to COP$10.4 trillion [US$2.68 billion], during one of the most challenging times for humanity due to the pandemic of Covid-19,” according to EPM.

“These [investment] resources -- included in the update of the EPM investment plan -- were approved by the Board of Directors in its session on July 27, 2021. The investments will allow the development of 132 infrastructure projects in Antioquia, providing services of [electric] energy, natural gas, aqueduct and sewerage, with quality, continuity, coverage and reliability.

“These investments in the Antioquia subregions are added to the transfers from the electricity sector that the company periodically gives to 52 Antioquia municipalities located in the Magdalena Medio, Northeast, North, West, East, Southwest and Valle de Aburrá, in addition to the Regional Autonomous Corporations: Corantioquia , Cornare and Corpourabá, in jurisdictions where EPM has hydropower generation reservoirs, including the river basins that supply them, or where powerhouses -- both hydraulic and thermal -- are installed.

“Between 2016 and 2020 these municipalities and corporations received COP$364 billion [US$94 million,” EPM added.

Written by July 28 2021 0

Medellin-based multinational supermarket/dry-goods retailer Almacenes Éxito announced July 27 that its second quarter (2Q) 2021 net profits soared 297%, to COP$50.7 billion (US$12.9 million), from COP$12.8 billion (US$3.2 million) in 2Q 2020.

The quadrupling of net income is credited to a “group diversification strategy with a higher contribution of complementary businesses, mainly royalties from TUYA [credit cards] and the development of real estate projects,” according to Éxito.

“Moreover, the company profited from a leaner financial structure and lower levels of non-recurring expenses from Covid-19. Results were partially offset by lower sales levels and the variation in income tax derived from the use of the statutory rate,” the company added.

Recurring earnings before interest, taxes, depreciation and amortization (EBITDA) for 2Q 2021 rose 2.5%, to COP$306.5 billion (US$78 million), while revenues climbed a modest 0.2%, to COP$3.7 trillion (US$942 million), according to the company.

Corporate consolidated results include Colombia, Uruguay and Argentina store operations, as well as the discontinued operation of Transacciones Energéticas S.A.S., according Éxito.

Revenue growth “benefitted by the recovery of complementary businesses, solid omni-channel growth and a higher share on sale of innovative formats (up 20.2% in Colombia, up 43.9% in Uruguay, up 9.3% in Argentina),” according to Éxito.

Recurring EBITDA growth came from “higher contribution from TUYA [credit-card] royalties, the real estate business and increased productivity,” according to the company.

Consolidated capex for 2Q 2021 was COP$54.9 billion (US$14 million), 72% of which was “focused on innovation, omni-channel and digital transformation activities,” according to the company.

The Éxito “Wow” and “FreshMarket” stores “continued growing sales above non-converted stores. New model ‘Vecino’ [format] implemented in ‘Super Inter’ allowed a remarkable double-digit sales evolution,” the company added.

For its rest-of-2021 outlook, Éxito expects to spend US$110 million to US$130 million in capex, of which US$90 million to US$110 million would be inside Colombia.

Commenting on the 2Q 2021 results, Éxito CEO Carlos Mario Giraldo stated: “Despite mobility restrictions in LatAm and social disruption in Colombia, Grupo Éxito continued improving its performance during the second quarter of 2021.

“The company consistently developed innovative formats, its on-line and omni-channel businesses, while our ‘Puntos Colombia’ and complementary businesses -- mainly the real estate and the financial divisions -- gained traction.

“Today, innovation has proved its importance more than ever and consumer trends confirm the statement. Our clients look forward to combining virtual and in-store purchases and we have continued capitalizing from it by strengthening our retail platform,” he added.

Gross margin improved by 124 basis points (bps), to 26% in 2Q 2021, and rose 158 basis points in first-half 2021, to a margin of 26.3%. “Quarterly margins were boosted by the higher contribution of complementary businesses mainly in Colombia,” according to the company.

“Retail margin (when excluding other revenue) gained 60 bps versus the one posted in 2Q 2020, driven by contribution from the development of real estate projects in Colombia and from cost efficiencies across countries,” the company added.

Written by July 28 2021 0

Medellin-based multinational utilities giant EPM announced July 27 that its first half (1H) net income hit COP$1.9 trillion (US$483 million), more than double the COP$717 billion (US$192 million) profit in 1H 2020.

Earnings before interest, taxes, depreciation and amortization (EBITDA) rose to COP$3.5 trillion (US$890 million), up from COP$2.8 trillion (US$752 million) in 1H 2020, while EBITDA margin hit 30% and net profit margin came-in at 16%, according to the company.

Gross revenues in 1H 2021 rose 26% year-on-year, to COP$11.7 trillion (US$2.97 billion), according to the company.

So far this year, EPM Group has invested COP$1.7 trillion (US$432 million) in infrastructure projects, of which COP$627 billion (US$160 million) correspond to the Hidroituango hydroelectric project in Antioquia.

Commenting on the results, EPM general manager Jorge Andrés Carrillo Cardoso stated: “These positive figures were achieved in part thanks to the community’s commitment to paying their bills for the public services, plus the improvement in operations due to the greater generation of energy from our hydropower plants -- which had high water inputs -- and also to higher energy sales.”

As of June 30, 2021, Grupo EPM total assets had grown 2% year-on-year, to COP$65.3 trillion (US$16.6 billion), while liabilities rose 4%, to COP$38.1 trillion (US$9.7 billion). The debt-to-EBITDA indicator for EPM Group closed at 4.0 in 1H 2021, compared to 3.9 for 1H 2020, the company added.

Written by July 16 2021 0

Medellin-based textile giant Coltejer revealed in separate July 15 and July 17 filings with Colombia’s Superfinanciera corporate oversight agency that it has decided to suspend production of non-woven fibers and begin a process to “reinvent” its whole business model.

“Taking into account the impact that the company has suffered due to issues related to [below-cost textiles and clothing] smuggling, the [Covid-19] pandemic and recent [violent ‘Comite del Paro’ strikes and road blockades] in the country, as of this date, the productive operation of the ‘non-wovens’ line is suspended,” according to Coltejer.

“In addition to the difficulty presented, we assume the situation as a challenge that allows us to transform the business and reinvent ourselves in response to the needs of the current market.

“The company is making every effort to resume its economic activity as soon as possible, of which notice will be given in a timely manner,” the company added.

In a follow-up filing July 17 with Superfinanciera, Coltejer revealed that shuttering the non-woven fibers production line will cut its monthly corporate-wide gross income by about COP$1 billion (US$262,000), “equivalent to 49% of current income.” Monthly profit losses from the non-woven-fibers shutdown would amount to COP$600 million (US$157,000), “equivalent to 19% of sales,” according to the company.

Earlier this year, Coltejer revealed it had suffered a full-year 2020 net loss of COP$94.6 billion (US$26.8 million), worse than its net loss of COP$24.9 billion (US$7 million) in 2019 (see Medellin Herald February 11, 2021).

Sales in 2020 also dropped to COP$74.8 billion (US$21 million), down from COP$141.9 billion (US$40 million) in 2019.

Coltejer also announced late last year (see Medellin Herald December 18, 2020) that it decided to abandon its pioneering textile factory in the southern Medellin suburb of Itagui, shifting its remaining operations to Rionegro, Antioquia -- and selling the Itagui properties.

In line with that shift to Rionegro, Coltejer announced today that it signed a commercial administration trust agreement with Credicorp Capital Fiduciaria SA as part of its Itagui property sale contract with Actual Corp Colombia SAS and Constructora Capital Medellín SAS. Coltejer simultaneously obtained a new loan from affiliate Coltejer Comercial SAS totaling COP$300 million (US$78,600), the company added.

Written by July 15 2021 0

EPM general manager Jorge Andrés Carrillo Cardoso announced July 14 that the latest capital cost estimate for the 2.4-gigawatt “Hidroituango” hydroelectric dam in Antioquia now stands at COP$18.3 trillion (US$4.8 billion), up COP$2.1 trillion (US$550 million) from the prior estimate.

On the positive front, Hidroituango has now recuperated physical setbacks suffered in April 2018 when a diversion tunnel collapse flooded and wrecked costly infrastructure in the machine room.

As a result of recovery work, Hidroituango is now 84.3% complete -- the same percentage of completion as just prior to the diversion-tunnel collapse three years ago, Carrillo said.

“This increased investment [for the recovery work] will be financed mainly with the internal generation of funds and the divestment plan in subsidiaries where EPM has no control,” according to EPM.

The first two generation units at Hidroituango will come online “in the second half of 2022 and the six units remaining between 2023 and 2025,” according to the company.

In a special visit to the site yesterday, Colombia President Ivan Duque added that EPM aims to start-up the very first Hidroituango power turbine “by June 2022 and, if we continue successfully with the schedule, we will have the second one around November 2022.”

Thanks to project recovery, “the cash flow [generated from electric power sales] between the years 2022-2061 continues to have a positive incremental Net Present Value (NPV) and an incremental Internal Rate of Return (IRR) higher than the cost of capital,” according to EPM – contradicting claims made by several project critics, including former Antioquia Governor Luis Perez.

Once fully operational at 2.4-gigawatts capacity in 2025, “the new plant will generate an average of 13,500 gigawatt hours per year [GWh/Year], with which it is expected to obtain commercial net revenues of between COP$1.5 trillion [US$394 million million] and COP$1.7 trillion [US$446 million] per year from 2025, depending on market conditions and prices,” according to EPM.

The hydroelectric plant will account for 17% of the entire nation’s power capacity, by far the single largest. Because of its zero-emissions status, Hidroituango also will provide a “significant contribution to compliance with the emission reduction commitments assumed by Colombia in the Paris agreements,” according to EPM.

“In times of drought, the new plant will substitute energy equivalent to a 750-MW thermal plant, with lower costs and cleaner energy,” the company added.

What’s more, under conditions of its tariff agreements, Hidroituango operation “will not have an impact on the rise in electricity rates, because in Colombia we are facing a competitive market,” the company added.

“With the financial strength and credit confidence of the EPM Group, the positive advances in the management of claims to insurers and reinsurers for contingencies, the internal generation of funds and the divestment plan that EPM's board and management are preparing to present to the Medellín City Council, in coordination with the municipal administration, we are able to leverage these new investments and the fulfillment of the schedule for the entry into operation and completion of the project,” Carrillo added.

To date, Hidroituango insurer Mapfre has paid EPM US$250 million under the “All Construction Risk” policy as well as another COP$16.9 billion (US$4.4 million) “Civil Liability” policy (which covers damages to third parties and community infrastructure resulting from the diversion-tunnel collapse) “and is advancing with the claim processes with the insurance and reinsurance companies,” according to EPM.

Commenting on the current construction work, EPM Vice-President William Giraldo Jiménez stated: “Among the most important works that are needed for the completion of Hidroituango are the recovery of the southern section of the machine room and the assembly of power generation units 5 to 8, as well as the definitive plugging of the right diversion tunnel and the auxiliary diversion gallery.”

In the northern section of the machine room, “progress is being made in the assembly of power generation units 1 and 2, with works such as concrete embedments and the installation of electromechanical equipment. At the site of units 3 and 4, demolition and clean-up tasks have already been completed,” according to EPM.

“The southern area of the machine room is used today for the unloading of oversized and extra-heavy equipment and, in turn, welding work is carried out with the assemblies of the ferrules.

“Since last December, replacement equipment has been arriving at the project to advance in the electromechanical assembly. Meanwhile, six of the 25 power transformers are already installed in place inside the cavern.

“We expect to start soon with the shielding of the pressure or vertical wells 1 and 2, an important work to strengthen these structures that lead the water from the catchments to the generation units,” the company added.

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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.

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