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Hidroituango Construction Progress in July 2021 Hidroituango Construction Progress in July 2021 Source: EPM

Kangaroo-Court Demagoguery Threatens to Harm Hidroituango, EPM, Foreign Investment

Published in Other Norms Written by  October 17 2021 font size decrease font size increase font size 0
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Medellin-based Conconcreto President Juan Luis Aristizábal – head of one of the three principal contractors for the US$5 billion “Hidroituango” hydroelectric project here in Antioquia -- today contradicted disturbing damage claims being made by Colombia’s Comptroller General as well as Medellin Mayor Daniel Quintero.

In a wide-ranging interview with El Colombiano -- Medellin’s biggest mainstream daily newspaper – Aristizábal points out that neither Conconcreto nor any of the 26 officials, politicians and companies named in the Comptroller’s COP$4.3 trillion (US$1.15 billion) damages claim over supposed “gross negligence” at the Hidroituango project have been given a chance to provide contravening evidence.

What’s even more disturbing is that there are indications that the Comptroller seems headed toward confirming its charges against the contractors in the next few weeks -- without ever hearing evidence from the accused, Aristizábal suggested.

Hence this Kafkaesque scheme – hearing only from the prosecution and almost nothing from the defense – could resemble a banana-republic kangaroo-court procedure, or Soviet communist dictator Josef Stalin’s murderous “show trials” of the 1930s -- rather than what people and companies in real democracies, such as in North America or Europe, deserve and ought to expect.

Even more ironic is that neither the Comptroller nor Medellin Mayor Quintero have any knowledge or experience in civil engineering, let alone hydroelectric dam-building. Yet both somehow are claiming to know the causes of the diversion-tunnel collapse at Hidroituango, which all engineering studies so far haven’t been able to prove conclusively.

If the Comptroller confirms its damage claims, then EPM must -- under Colombian law -- terminate the existing contracts of the affected Hidroituango builders and designers, then find and get-up-to-speed some unknown replacement contractors -- hence delaying the project likely for many months beyond the current June 2022 scheduled start-up of the first power turbines.

Such delays could cost EPM huge fines not only for failure to provide power to the national grid -- as it has legally promised by June 2022 -- but also untold hundreds of millions of dollars in revenues from lost power sales because of inevitable delays from training new contractors.

Then there’s an enormously costly US$450 million loan pre-payment obligation to the Interamerican Development Bank (IDB) if the project fails to come on-line by June 2022.

What’s more, these fines and costs would come in addition to possibly hundreds of millions or even billions of dollars in counter-claims that probably will be brought by contractors, along with civil torts brought against EPM by lawyers representing persons temporarily displaced downstream of Hidroituango as a result of the 2018 tunnel-collapse incident.

And as a final wound, Hidroituango project insurer Mapfre possibly could cancel all further insurance payments beyond the US$350 million already paid to EPM, and – potentially – demand repayment of what it has already paid, citing the Comptroller’s finding of “gross negligence” and Mayor Quintero’s repeated, unsubstantiated claims of “corruption” and mismanagement.

Following a pattern, Mayor Quintero continues making wild, unsubstantiated claims against the Hidroituango contractors, former EPM officials and former Antioquia elected officials.

The latest pot-shot claim from Quintero – made last week without offering a single shred of evidence -- is that the contractors used substandard construction materials and made reckless design and execution decisions, which supposedly led to the costly 2018 collapse of a diversion tunnel at Hidroituango.

In addition, Quintero now claims that Mapfre and lesser insurers have just decided to exclude insurance payments for diversion tunnels, for some required stabilization works, for much of future lost-power sales and for other Hidroituango project costs that collectively would total roughly US$1 billion.

But if Quintero and the Comptroller are successful in their campaign to blame the main contractors and some former officials and former politicians for the tunnel collapse – resulting in a mandatory switch of contractors, enormously costly delays and inevitable counter-lawsuits – then EPM could lose far more than the US$1 billion that supposedly has been excluded from insurance payments.

To date, Mapfre has not stated publicly what it plans to exclude from insurance payments, nor explain how much it had planned to pay EPM for supposedly covered losses at Hidroituango.

But many leading engineering firms, trade associations, trade unions, public-advocacy organizations -- and now even Colombia President Ivan Duque -- have publicly stated that the correct way forward for recovering Hidroituango damage costs ought to be via negotiations with insurers, rather than blaming contractors.

However, according to Conconcreto President Aristizábal, if blame must be placed on anyone, then the correct target ought to be EPM itself, rather than its contractors, as Aristizábal explained in the El Colombiano interview published today. This would mirror public statements made by some legal experts that Mayor Quintero's US$2.85 billion parallel lawsuit against Hidroituango contractors actually could wind-up as a case of EPM suing itself.

In the interview, Aristizábal pointed out that Conconcreto wasn’t involved in designing nor building the diversion tunnels, which actually were designed and then demanded by EPM, the general contractor for Hidroituango.

“We are not responsible for the design, or the selection of materials, or the decisions that are made around all these activities,” Aristizábal stated in the interview. “We execute the construction, with the designer's guidelines, it is approved by the controller and received by our contractor EPM. All the works that we execute were supervised by the controller, approved by the designer, received by EPM and paid for by them.”

So, if anyone is to blame for the diversion tunnel collapse, then the blame ought to be put on EPM, which specified and approved all design, engineering and execution at Hidroituango, he said.

As a result, the Comptroller “should be investigating EPM. Furthermore, the resources managed by EPM are public resources. We are not fiscal agents because they did not give us an advance and because the money we received from EPM was a payment for services,” Aristizábal concluded, citing the Comptroller's responsibility for investigating public entities.

On another ominous note, Aristizabal pointed-out that Conconcreto’s principal stockholder is France-based Vinci. Hence the eyes of foreign investors are now fixed on the outcome of the current legal claims, which if adverse to some of Antioquia’s biggest and historically prestigious companies could discourage crucial foreign investment that generates tens of thousands of jobs, vital infrastructure development, huge tax revenues and economic progress for all Colombia, Aristizábal added.

Read 178 times Last modified on Last modified on October 17 2021

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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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