EPM’s Hidroituango Mediation Talks With Contractors Collapse, Warring Lawsuits Filed

Medellín’s city-owned utility conglomerate EPM (Empresas Públicas de Medellín) must now face its consortium of contractors building the mammoth Hidroituango hydroelectric project in court after mediation talks demanded by the city’s mayor Daniel Quintero failed last week. Additional parties to the conflict include insurers Mapfre, Chubb, and Sura.

While EPM seeks a litigation jurisdiction of Antioquia Administrative court, the consortium is countersuing in an international court, away from potential political influence in Antioquia’s capital of Medellín.

Medellín Mayor Daniel Quintero (Photo courtesy Alcaldia de Medellín)

Quintero ran on a populist platform alleging corruption in the management of public bond issuer EPM, and soon after taking office as Medellín’s mayor, moved to take direct control of the utility, replacing its board of directors with personal allies after the old board resigned in protest of his tactics.

Eight months into his administration, Quintero directed EPM to file for mandatory mediation with Colombia’s attorney general against the consortium building the troubled hydroelectric dam. The project suffered near catastrophic setbacks after a bypass tunnel collapsed required EPM to flood the unfinished generation facility in the dam to prevent a catastrophic dam failure that could have killed tens of thousands of residents downstream in April 2018.

The previous administration and management team preferred a less confrontational approach, working with the contractors and insurers to mitigate the damage, but now the conflict may cause a delay in the completion of the project, which in addition to not providing Colombia with the electrical supply the country was counting on, can subject EPM to multimillion-dollar penalties for failing to comply with contractual obligations.

“There has always been a suspicion of a possible hiring of a Chinese company for the completion of the work,” said Olga Lucía Arango, president of Sinpro.

The consortium CCC Ituango, comprising Coninsa-Ramón H, Conconcreto, and Brazilian firm Camargo Correa, is taking the conflict to international court, counter to the desire of the Quintero administration’s strategy of keeping the litigation in a local jurisdiction.

“The Consortium reiterates its interest in demonstrating that, in the execution of the civil works under its responsibility, 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 Públicas de Medellín (EPM),” said the consortium in a statement. “At the same time, we are forced to seek to compensate for the reputational and economic impact that this unique claim has been causing to the Consortium.”

SINPRO President Olga Lucia Arango

The lawsuit for $9.9 billion pesos (roughly $2.8 billion USD, as the Spanish billion equals the US trillion) is between EPM and the designer Generación Ituango (Solingral SA and Integral), the CCC Ituango construction consortium, the construction management consortium Ingetec–Sedic, and reinsurers Chubb & Sura. Another lawsuit for $5.5 billion pesos  ($1.6 billion USD) is between EPM and Spanish insurer Mapfre. Mapfre had already acknowledged that the flooding was an insurable los and was in the process of adjusting the claim when it was sued by EPM at Quintero’s direction.

Meanwhile, EPM’s largest union SINPRO has expressed its dissatisfaction with EPM’s management and Quintero’s direction of the litigation, citing “the possible decisions made by risk rating agencies, EPM bondholders and multilateral banks, which could imply prepayment of debts.” Endangering EPM’s finances and employment.

“We do not know what the ‘plan b’ is because we do not know it and there has always been a suspicion of a possible hiring of a Chinese company for the completion of the work,” said Olga Lucía Arango, president of Sinpro.