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Written by January 09 2021 0

Medellin-based electric power giant EPM announced this morning (January 13) that it has petitioned an Antioquia Administrative Court in Medellin to assume jurisdiction over its COP$9.9 trillion (US$2.85 billion) lawsuit against Hidroituango construction contractors.

The petition to the Court follows the failure last week of a “conciliation” procedure that had been supervised by Colombia’s Solicitor-General.

EPM now simultaneously asks the Medellin Chamber of Commerce to assume arbitration of its related COP$5.5 trillion (US$1.58 billion) claim against insurer Mapfre for its supposed coverage of losses arising from a diversion-tunnel collapse at the Hidroituango hydroelectric project in 2018.

The petition to move the main damages claim against Hidroituango contractors to an Antioquia Administrative Court now faces a venue fight, as the contractors have instead petitioned for an international tribunal to settle the dispute. Rationale: One of the three main construction contractors isn’t Colombian, but is instead Brazil-based Camargo Correa Infra. The other two are Colombian companies Conconcreto and Coninsa-Ramón H.

EPM asserts that it initially moved to bring a “conciliation” suit against the contractors last year because of a supposed two-year legal deadline to bring claims following the April 28, 2018 diversion-tunnel collapse.

This EPM argument is disputed by former Colombia Supreme Court Justice Javier Tamayo Jaramillo, now head of the Medellin law firm of Tamayo Jaramillo & Associates.

In a legal analysis submitted by Tamayo to the “Todos Por Medellin” civic group last month, Tamayo explains that the actual legal deadline for filing such a damages claim instead would come within two years following the expiration of the construction contract, not the two years following the tunnel collapse incident.

“There is almost absolute doctrinal and jurisprudential unanimity in that the expiration date of this type of actions is counted from the settlement of the respective contract, which, to date, has not occurred,” Tamayo states in his legal opinion.

“What was the desire to file a lawsuit against so many defendants without having sufficient proof of their responsibility or even knowing the intensity of the damages or the value of them? Was it a matter of causing a media impact to create the feeling that the previous [EPM] administration was going to let EPM’s actions against those responsible for [the tunnel collapse] expire?”

The new EPM lawsuit claims that the construction contractors as well as insurers Suramericana, Chubb Seguros and Mapfre now must answer its claims in court or else in arbitration.

While Mapfre “has recognized the coverage of the [tunnel-collapse] event and has ratified it in the framework of the conciliation hearings, we are still working on the determination of the compensable amounts in the insurance [policy] conditions, based on the fact that this claim is the largest worldwide in terms of All Risks Construction and Assemblies, and is therefore subject to study and review throughout the insurance market,” according to EPM.

“It is for this reason, and no other, that it was not possible to arrive at a figure that would allow us to satisfactorily terminate the preliminary ruling conciliation process. Mapfre confirmed that its main interest is to cover all compensable losses, in accordance with the insurance conditions.

“Based on the foregoing, the EPM Group ratifies its commitment to advance in the technical adjustment process until compensation for losses is achieved within the framework of the insurance contract signed with the Mapfre company.”

Meanwhile, “in both judicial scenarios, conciliation exercises are contemplated, which offer us a new opportunity to seek a comprehensive solution to the differences derived from the contingency,” according to EPM.

Contractors Dispute Claims

According to the “CCC Ituango Consortium” of Hidroituango construction contractors, they now seek international arbitration and will file counter-claims against EPM.

“The consortium reiterates its interest in demonstrating that in the execution of the civil works under its charge, it has not only acted in good faith but diligently and in accordance with good engineering practices, complying with the designs and instructions provided by Empresas Publicas de Medellin (EPM),” according to CCC Ituango’s official press bulletin, reacting to the “conciliation” failure.

“Having extended the contract at the end of December [2020] by EPM, the consortium will continue executing the work in the same way as it has always done: complying with its contractual obligations, maintaining adequate quality standards and meeting technical requirements. and designs supplied by EPM itself.

“The consortium remains firm in its commitment to take Hidroituango forward, understanding that this requires collaborative work with the other contractors of the project, but above all, having the adequate coordination of EPM so that the objectives of the project are met.

“The CCC Ituango Consortium is led by Camargo Correa Infra and as a [Brazilian] foreign partner we will submit the [lawsuit demand] differences to an international court, where technical and legal arguments prevail to make clear the actions of the consortium in the [diversion-tunnel collapse] contingency of April 2018.

“At the same time, we are forced to seek to compensate the reputational and economic impact that this unique claim has been causing for the Consortium,” the bulletin concludes.

EPM Trade Union Slams Lawsuit Decision

Meanwhile, Sinpro – EPM’s biggest employee trade union – likewise slammed EPM’s failure to settle the claims under friendly “conciliation” terms.

“We have indicated since September [2020] that EPM’s claim of COP$9.9 trillion from the contractors represents great risks for the company’s finances and for the development of Medellin and Antioquia, as there could be a possible counterclaim from the contractors with possible consequences in the qualifications of [Wall Street bond-rating] risk qualifiers and the possible loss of part of the [Mapfre] insurance coverage, without taking into account what it implies for the contractors.

“These are the risks that the Mayor of Medellin, the [recently installed] Board of Directors of EPM and the [recently named] general manager of EPM are now bringing upon the company in a new display of folly where it is evident that personal and political interests prevail over legal interests and of the community,” Sinpro warned.

The Sinpro charge alludes to Medellin Mayor Daniel Quintero’s bypassing of the prior EPM Board of Directors last year in bringing a lawsuit against Hidroituango contractors that potentially could cost EPM billions of dollars in counter-claims.

If successful, counter-claims could wreck city-owned EPM’s finances for years or even decades to come – all triggered by politically self-interested, sweepingly populist claims that portray Mayor Quintero as standing-up to Medellin’s “corrupt” business sector.

However, this claim is publicly and sharply disputed by dozens of commercial and industrial trade associations, several trade unions and many civic groups, some of whom are calling for Mayor Quintero to be removed from office via a recall petition.

Written by January 07 2021 0

Smurfit Kappa Colombia on January 4 announced a US$50 million investment in a new corrugated-cardboard plant in Guarne, Antioquia, just east of Medellin.

To make way for the new plant, Smurfit Kappa recently sold a lot in Medellin that hosts its existing, 60-years-old "Carton de Colombia" plant.

Colombia Real Estate Fund-FIC, Arquitectura y Concreto and Londoño Gómez paid Smurfit Kappa US$50.3 million to acquire the Medellin lot for a new urban-development project, according to Smurfit.

“As of the first quarter of 2021, the construction of the new plant [in Guarne] begins, with an investment of US$50 million, including a totally new, state-of-the-art corrugator [production line], and new printing and finishing machines for cardboard boxes, as well as relocation of the current plant equipment,” according to the company.

“The new plant will enter into operation towards the end of 2023, with 50% greater capacity and designed to grow modularly until its capacity is doubled.

“In this way, Smurfit Kappa will generate more quality jobs in the region, both in the construction phase -- around 345 direct and indirect jobs -- and with the expansion of its production capacity. It will also strengthen its portfolio of packaging solutions for the mass consumption, industrial and agricultural sectors, including flowers and bananas, among others.”

The new plant will have Leadership in Energy and Environmental Design (LEED) certification “for sustainable construction and will make available to customers a 'packaging experience center,' a space dedicated to innovation, where they can experience the design of their packaging with cutting-edge methodologies and tools, exclusive to Smurfit Kappa,” according to the company .

According to Alvaro José Henao, President of Smurfit Kappa for Colombia, Ecuador, Central America and the Caribbean, “with a market that increasingly demands sustainable, innovative and efficient packaging, investing in Colombia continues to be a great bet for the Smurfit Kappa Group.”

Written by December 26 2020 0

Medellin-based electric power giant EPM announced December 22 that it reached agreements with all current construction, supervisory and consultancy companies to continue construction of the estimated US$5 billion, 2.4-gigawatt Hidroituango hydroelectric dam in Antioquia.

The contract renewals run through December 31, 2021, but could be extended until the entire project is completed, likely in 2024.

EPM general manager Álvaro Guillermo Rendón López added that “some clauses were included that will allow the contract to be extended -- once future validations are completed -- until the end of the project.”

CCC Ituango construction consortium leader Juan Luis Aristizábal Vélez -- president of construction giant Conconcreto -- added that “the signing of this contract is a sign of commitment to the project,” as it avoids costly problems that would arise if some new contractor were forced to take-over the project.

The three new contract extensions include:

1. Consulting via Consorcio Generación Ituango, which includes Integral Ingeniería de Supervisión S.A.S. and Integral Ingeniería de Consulta S.A.

2. Auditing services for civil works and electromechanical equipment, via Ingetec-Sedic Consortium.

3. Continuing construction of the dam works, power plant and associated projects via the CCC Ituango Consortium, which includes Camargo Corrêa Infra S.A, Constructora Conconcreto S.A. and Coninsa-Ramón H. S.A..

During 2021, “extension of these contracts will be sought to the extent that EPM has the assigned budgetary resources and all technical and legal requirements are met,” according to EPM.

“The three main contractors have expressed their desire and commitment to continue advancing in the development of the project and take it until commissioning,” with the first portion of power generation scheduled to start in 2022 and the final set of generation units starting-up in 2024.

EPM’s biggest trade union Sinpro praised the new agreement that extends the existing contracts -- even in the face of EPM's questionable “conciliation” lawsuit against the current contractors as pushed by Medellin Mayor Daniel Quintero and EPM’s new general manager this year.

That lawsuit could have prompted the current contractors to abandon the project, adding even more delays that could have resulted in hundreds of millions of dollars of lost power sales and regulatory power-provision penalties, Sinpro explained.

Meanwhile, “conciliation” lawsuit talks continue, with hopes that all parties soon come to a friendly agreement that would resolve confusing, contradictory claims about responsibilities for an earlier tunnel collapse at the project. EPM claims that financial damages resulting from the tunnel collapse total COP$9.9 trillion (US$2.8 billion). 

However, lacking a reasonable, fair settlement of such claims among all responsible parties (including EPM itself, which shares at least some blame), EPM's lawsuit potentially could endanger hundreds of millions of dollars of existing Hidroituango insurance payments -- and trigger counter-suits that potentially could cost EPM billions of dollars, according to Sinpro.

Written by December 18 2020 0

Medellin-based textile giant Coltejer revealed in a December 17 filing with Colombia’s Superfinanciera oversight agency that it now plans to abandon its foundational factory in the southern Medellin suburb of Itagüí.

When this abandonment is complete, all remaining textile operations will shift to Rionegro, Antioquia, according to the company, founded in 1907 by pioneering industrialist Alejandro Echavarría Isaza, his son Gabriel and five nephews.

Echavarría not only became Medellin’s most famous industrialist of the era, but also a crucial social benefactor with the founding of the Hospital San Vicente de Paúl complexes.

Echavarría later bought Medellin’s most famous castle-style residence, “El Castillo,” today a museum and event center owned by the city of Medellin.

Coltejer faced the first of many future financial crises in 1974 when world-wide textile manufacturers went overboard on production, resulting in below-cost contraband trade to Colombia. Such contraband has continued ever since, causing huge financial losses to Colombia’s textile producers generally and Coltejer specifically.

In 1978, Medellin-based industrial giant Carlos Ardila Lulle bought the majority of shares in the company, but he couldn’t reverse its fortunes. Then, in 2008, Mexican textile giant Grupo Kaltex became the majority shareholder, trying to find financial synergies.

According to yesterday’s filing with Superfinanciera, Coltejer’s board of directors have finally given-up on the historic Itagüí plant, selling it to real-estate developer Acierto Inmobiliario SA. As a result, Coltejer now plans to move its remaining operations to the Rionegro plant -- tied to modifying certain outstanding credit arrangements with Grupo MCM Colombia S.A.S.

The credit rearrangement deal is tied to “canceling some guarantees that were in favor of [MCM] in order to replace them with properties located in the municipality of Rionegro. Mr. Rafael Kalach [president of Kaltex] abstained from voting on this proposition,” according to Coltejer’s filing.

“In accordance with the negotiation of a part of Coltejer’s land in Itagüí, the industrial operations of the plant [in Itagüí] will be discontinued, leaving the Rionegro plant in operation,” according to Coltejer.

Lands occupied by Coltejer’s factory complexes in Itagüí – now scheduled for non-industrial redevelopment -- are valued at COP$178 billion (US$52 million), according to the filing.

Written by December 16 2020 0

Global mining giant AngloGold Ashanti Colombia announced December 16 that it has launched initial recycling of mine tailings near Jericó, southwest Antioquia, into a cement-like product suitable for buildings, prefab homes, roads, ceramics, paints, outdoor furniture and soil amendments.

The announcement comes on the heels of new demands from Colombia’s environmental licensing agency (ANLA) and Antioquia’s Mining Secretariat for more information on how AngloGold Ashanti aims to avoid environmental impacts from its proposed “Quebradona” copper-gold mine near Jericó.

To date, AngloGold has already fabricated outdoor furniture, chairs, drinking fountains and flower pots – all made from tailings -- for three schools in Jericó.

“In order to help close the cycle of waste produced by mining activity and thus advance in the generation of a true circular economy, ‘Minera de Cobre Quebradona’ will implement different alternatives to give a new use to dry tailings,” according to AngloGold.

“We are testing the dry tailings in different applications,” explained Andrés Felipe López Bermúdez, Manager of Innovation at the Quebradona project. “The inert tailings -- which are almost dry -- are very fine sands, which have a thousand possibilities in terms of construction. Soon we will do the first test of tailings for paving tertiary roads. We have a possibility of paving 1,800 kilometers of tertiary roads in the southwest [Antioquia], where the tailings of Quebradona can serve this purpose and enhance the competitiveness of farmers so that they can move their products with less travel times,” López added.

On a related front, AngloGold announced December 15 that it is generating additional data for ANLA regarding “monitoring of surface water quality, hydrobiological and isotopic parameters in the tributaries of the upper, middle and lower parts of the La Palma and La Guamo streams that are in the [rural districts of] La Hermosa, Palocabildo, Vallecitos and La Soledad,” near the Quebradona mining site.

As for the Secretariat of Mines of Antioquia, “as part of the mining licensing process, an alignment and understanding meeting was held between the technicians of the Secretariat and Minera de Cobre Quebradona staff to clarify and respond to a large part of the [additional environmental data] requirements,” according to the Secretariat.

The additional data will include updates and revisions to maps and geological studies in specific mining areas, according to the Secretariat.

Mayor of Jericó Supports Project

While various environmental advocacy groups and some nearby residents have raised fears and objections to the proposed underground mine, Carlos Augusto Giraldo, former two-time Mayor of Jericó, argued in a December 7 column in Jericho newspaper Al Poniente that AngloGold has proven to be an environmentally and socially responsible miner.

“In the framework of the ANLA’s recent visit to Jericó, some opponents of the Quebradona project affirmed on social networks and in the media that the vast majority of Jericoanos had come out to protest against it,” Giraldo stated.

“The reality is that of the almost 100 people who took to the streets, only a few, less than 10, were from the municipality. The rest came from other places in buses and collective taxis.

“This is a clear example that what happens in Jericó is different from what some people think and declare from Medellín, from Bogotá, from far away Miami or from those who sign applications on the internet from other municipalities, or even from outside the country.

“The mining company’s workers are not at some desk processing a license. They are usually here in Jericó, they get involved with the people, they listen to the questions and they respond with transparency.

“It is true that, in recent years, thanks to the work carried out to promote tourism and other agricultural activities, the municipality has developed new sources of resources and employment.

“But if we Jericoanos have something clear, it is that there is still a long way to go in terms of education, health and well-being. For this reason, a large part understands that all [mining] activities can be carried out with responsibility and oversight by the state and citizens.

“Some data about what Jericó is experiencing: according to the DNP [Colombia’s national development planning department], the net coverage of education here is 77.7%, compared to 84.5% in Antioquia. In secondary education, aimed at 10th and 11th grade youth, the net coverage is 52.2%.

“Likewise, a study carried out by the ECSIM Foundation indicated that one out of every five inter-municipal trips made from the [southwestern Antioquia] province of Cartama to Medellín is for health reasons due to the lack of the required health-care services here.

“Although Jericó does better than some of its neighbors in DANE’s [Colombia’s economic statistics agency] multidimensional poverty indicators, there are areas of the municipality that register percentages of up to 100%.

“In this context, Minera de Cobre Quebradona has understood that its role as a catalyst for the economy must positively impact other social aspects, for which it has worked using institutional channels to support local entities.

“What happens in Jericó, as referenced by the National Consulting Center in a study published in May, is that the majority of people here support the project, not for one reason, but for the multiple reasons mentioned above.

“My invitation to the opponents is to listen to the people, understand their fears and provide solutions, as the mining company has done in recent years. It is also important that opponents resolve their technical or social doubts about the project by asking questions, but not by accusing and even less, by assuming [negative outcomes].

“As Colombian author Héctor Abad Gómez has said, ‘the courage to admit that one does not know, that one doubts, that one is not sure, although difficult to practice, is an indispensable value in today’s world,’” Giraldo 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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