Mapfre Pays Another US$100 Million for Hidroituango Damages; Generator Installations Start in November; Designers, Builders Contradict Claims; Civil-Suit Hearing in October

Medellin-based electric power giant EPM announced September 15 that — as expected — it just received a second, US$100 million installment from insurer Mapfre to cover equipment-and-infrastructure damages from an April 2018 diversion-tunnel collapse at EPM’s 2.4-gigawatt Hidroituango hydroelectric project.

Combined with a December 2019 insurance payment of US$150 million, Mapfre has now paid EPM a total of US$250 million for equipment and infrastructure damages.

EPM’s Mapfre policy covers up-to US$2.556 billion for Hidroituango infrastructure and equipment damages, plus up-to-US$628 million for lost power sales – covering only a small part of four years of lost sales that should have started in 2018 rather than in 2022 as now projected.

EPM continues to estimate that initial start-up of four power turbines will take place in 2022. However, it’s still uncertain when all power turbines at Hidroituango will begin operation, although the company expects to see further units start-up in 2023 and beyond.

The total of US$250 million in Mapfre payments to date “corresponds to what was recommended by the [insurance] adjuster, according to expenses and investments made by EPM in the recovery of the project,” according to EPM.

EPM “continues in the process of quantifying the damages, the replacement of equipment and the repairs of the project as it progresses in its diagnosis, design and contracting,” according to the company.

The Hidroituango project is now about 80% complete, according to EPM. Currently, construction “is in full swing, with about 3,200 workers on different fronts,” thanks mainly to special efforts to isolate and overcome earlier cases of Covid-19 that had temporarily forced isolation of many workers and slowed progress this year, the company added.

“Today the work is focused on the stabilization of caverns and galleries, the intermediate discharge tunnel, the stabilization of the rock massif in the upper part of the [water intake] gate shafts, the operation of the weir gates, the electrical substation, the maintenance of roads and monitoring the behavior of the reservoir, dam and spillway,” according to EPM.

First Generator Installations in November

Meanwhile, EPM revealed September 11 that it expects the first two generator units at Hidroituango to be installed by November 2020.

“The transformer cavern is ready and cleaned. Work is being done on stabilizing caverns and galleries,” according to the company. “In the powerhouse, demolitions are carried out in units 1 and 2 and at the same time the area is being stabilized to avoid risks.”

Once the transformer cavern is ready, “seven new transformers will be installed — being received in November 2020 — and then another 12 transformers in 2021,” according to EPM.

Integral SA Slams Blame-Gamers

Meanwhile, Medellin-based engineering and design consultant Integral SA on September 16 issued a public statement condemning assertions by the current EPM management and Medellin Mayor Daniel Quintero that contractors and designers are to blame for the tunnel collapse that ultimately could cost EPM billions of dollars in lost power sales.

Below is the Integral SA public statement, in full:

“On the occasion of the recent events related to the disclosure of the [Hidroituango tunnel-collapse] report of the technicians of the reinsurers, and the successive statements and news disseminated in the media, Integral SA states the following:

“1. The Hidroituango project was conceived and developed by our company over more than 50 years, aiming to guarantee clean energy for Colombians. This project is one of our greatest reasons for pride. For the development of the project we have applied — in the studies, in the design and in the consultancy during the construction — the best engineering practices, in consideration of the magnitude and importance of the work.

“2. Based on a root-cause report contracted by EPM and also on a report contracted by the reinsurers to define the protections to be covered by the policy, suggestions have been made that Integral SA is possibly responsible or co-responsible for the [tunnel collapse] contingency. Said reports — contradictory among themselves and with serious deficiencies in scientific and investigative methods — have also given rise to statements with large amounts of speculation and lack of objectivity that do not contribute to reliably clarify the facts.

“3. The design methods applied by Integral SA follow the state-of-the-art in hydroelectric project engineering and have been validated by various actors in the project, including the author of the root-cause study hired by EPM. During the design and advisory stage, Integral SA never received objections from EPM or the international Advisors related to the designs.

“4. Integral SA responsibly and autonomously made a root-cause report and a complementary report, both of which contradict the conclusions of the report contracted by EPM. These documents were presented to the previous EPM administration more than a year ago and recently also to the current EPM administration. To date, Integral SA has not received a response.

“5. The obligations of Integral SA during the design and consultancy in the construction of the project are clearly defined in the contractual documents and contrast with the responsibilities that [EPM or others] have tried to assign to it, notoriously affecting our professional reputation and unblemished business history.

“6. Integral SA has the deepest conviction of having acted in a professional, correct and ethical manner in all the actions that fall within the project, always within the framework of its contractual responsibilities.

“7. Integral SA is fully committed to the completion and start-up of the project, which it considers to be the highest priority for the country in terms of risk mitigation, and for this it is willing to continue providing all its knowledge, obtained through 65 years of successful corporate history, both in Colombia and abroad.”

Consorcio CCC Ituango Rejects Claims, Attacks

Meanwhile, the three construction companies in the “CCC Ituango Consortium” — Conconcreto, Coninsa Ramon H and Camargo Correa Infra – on September 14 issued a public bulletin contradicting claims that its construction methods and materials could be blamed for the Hidroituango tunnel collapse.

According to the Consortium, its construction works were undertaken “in full compliance with the technical specifications, field instructions and guidelines of the client EPM, which in turn is the main constructor in the development of the BOOMT [build-own-operate-maintain-transfer] contract signed with Hidroelectrica Ituango SA ESP and of which the Consorcio CCC Ituango is the executor of the construction.

“The reinsurers report — recently known to us through the news media — is one of the technical studies that has been carried out by the different stakeholders in the causes of the [tunnel collapse] losses. This report — whose conclusions we do not share — contains the findings of a group of technicians whose objective, we understand, was to establish the coverage of a policy and not the responsibility of the insured.

“The CCC Ituango Consortium has acted in a transparent manner and has the peace of mind that it has fully complied with its obligations: consequently, we have provided the information that interest groups and control entities have requested.

“To date, 25 kilometers of tunnels have been executed; more than 2 million cubic meters of rock have been excavated in underground works; 15 million cubic meters of rock [used] in exterior works and about 1 million cubic meters of concrete have been used, which have been defined by the designer, supervised by the controller and received to the satisfaction of our client EPM.

“The CCC Ituango Consortium and the more than 3,000 workers have been committed to EPM and the project to continue with the designs, technical specifications and adequate materials. In addition, we have satisfactorily responded to the different instructions and requests that we have received from our contractor EPM during the execution of the project.

“Departing from other discussions that do not contribute to the project, and after more than seven years of uninterrupted work, fulfilling our obligations and defending our values, we will remain committed while there are no impediments for the Hidroituango [project] to contribute to the development of Medellin, Antioquia and all of Colombia,” the group concluded.

Civil-Case Hearings Continue

Meanwhile, Colombia’s Procuraduría General — roughly equivalent to the U.S. Attorney-General’s Civil-Case Division — announced that its current investigation into the Hidroituango tunnel collapse so far has included taking statements from various parties. A preliminary hearing is set for October 21 on EPM’s COP$9.9 trillion (US$2.6 billion) “conciliation” lawsuit against Hidroituango contractors and insurers.

Parties to the EPM “conciliation” lawsuit include Consorcio Generación Ituango (Integral – Solingral), Consorcio CCC Ituango, Consorcio Ingetec y Sedic, Seguros Generales Suramericana and Chubb Insurance.