The consortium, which was awarded the project on October 11 after the conclusion of the public bid process, is composed of the companies LTD Sucursal Colombia, Schrader Camargo S.A.S., and Yellow River CO.

After being selected, the CYS Consortium will carry out a contract for civil works for a value of more than $252 million USD that is to be completed over 1,125 calendar days (or three years and four months). 

EPM announced that, since the initial planning of Hidroituango, the implementation of the project has been planned in two stages, each composed of four energy generation units.

The first stage included units 1 to 4. Turbines 1 and 2 are already operating. For its part, per El Tiempo, the general manager of EPM, Jorge Andrés Carrillo, indicated that the progress of turbine 3 is 93.1% and 4 has advanced to 84.3%. This newly awarded second stage calls for the completion of units 5 to 8.

A Timeline of Troubled Contracting for Hidroituango

Questions have loomed over the contracting process of Hidroituango. In December, then-Medellín mayor Daniel Quintero, who abruptly resigned this month, demanded that the contractor that had been working on the dam for more than 10 years, CCC Ituango, renegotiate the existing contract. The organization refused that request and it led to a legal fight.

Additionally, the Ituango PC-SC Consortium previously made a bid for more than $200 million USD, despite complaints against it raised by independent consultants. In a detailed report by the engineering consulting firm Pöyry/Afry, it was found that delays in finishing Hidroituango and the commissioning of the eight turbines, named before in the two stages of the project, would likely create structural risk for the dam due to the stress prompted by the Cauca river flow going over the spillway or through bypass tunnels instead of through the generation turbines, as it would be meant to be.

More recently, suspicions emerged around the project due to the unclear actions of Quintero, who actively participated in the building process as chairman of the board of city-owned EPM during his term.

In August 26, 2022, the home services company lowered the standard requirements necessary for the project at the behest of the Chinese Yellow River CO firm, after it alleged that there were not enough Colombian firms with experience on the hydroelectric dams who were also interested in undertaking the Hidroituango project.

“We have found an alternative to partner with a local company that is interested and has extensive experience in this type of work,” stated Yellow River CO in a letter sent to EPM,  as reported by El Colombiano. “However, in order to comply with the particular conditions, it is necessary for EPM to reconsider one of the following proposals, to which the Colombian participant must provide the conditions of experience.”

Subsequently, it became known that capable local companies were loath to get involved in the project after Quintero rejected CCC Ituango’s contract to continue operations. In response, this company refused to continue after its initial contract phase was completed.

EPM’s decision of changing the standard requirements for the project was strongly criticized by the Colombian Chamber of Infrastructure. This association, made up of construction businessmen, accused the city company of tailoring the requirements in order to make it easier for a specific firm to win the bid. In Colombia, this supposed malpractice in contracting is known as “tailor sheets”.

In the end, that tender was declared void in 2022.

Photo: Hidroituango (Credit: EPM)

Finance Colombia has previously reported that the Ituango PC-SC Consortium, made up of two Chinese government-affiliated construction companies, Yellow River CO LTD and Power China International Group Limited Colombia Branch, and one Colombian company, Schrader Carmargo appears to be the one that will move forward with the construction of the troubled project.

As controversies abound over the funding and construction of the project, Medellín daily El Colombiano has revealed that some past projects of Sinohydro Corporation Limited, which is a subsidiary of Power China International, have been haphazard and expensive with very little success to show for it publicly for the project host countries.

Among the projects that Sinohydro has done in Latin America region is the Coca Codo Sinclair, a billion-dollar project located on the Coca River in Ecuador, billed as the largest of its kind inside the country and designed to create over 35% of the nation’s energy needs.

Despite its high price tag of $3.3 billion, the structure reportedly suffered multiple fractures; a report from the Control Commission of Ecuador’s National Assembly found more than 17,499 cracks, as well as other construction-related problems. The project reported only generates 700 megawatts of power, less than half of the 1,500 megawatts that was supposed to be its capacity.

Questions have abounded about the new consortium, allegedly ushered in by the Quintero administration after he had demanded the previous contractor, the CCC Ituango Consortium, to renegotiate their contract after accusing them of corruption–something which they refused to do.

Among the questions about the new consortium is their knowledge of the Hydroituango project, taking over from a previous contractor that left on less than cordial terms with the Quintero-controlled EPM.

The bidding process has also received harsh criticism, with the editorial staff of El Colombiano openly-questioning the haphazard and much-delayed bidding process that ended up with a single bidder. Olga Lucia Arango, the president of EPM’s largest labor union, SINPRO, had claimed as early as 2020 that the controversy was engineered by Quintero in order to re-issue the contract.

Jorge Andrés Carrillo, the CEO of Empresas Públicas de Medellín (EPM) is already claiming that the operations of the first two turbines in the dam have decreased the prices of electricity in Colombian electricity exchanges by more than 60%.

Como siempre lo hemos dicho, #Hidroituango es la seguridad energética del País. La entrada en operación de las unidades 1 y 2 con 600 MW ya tuvo un impacto en el precio en la bolsa de energía: hace 8 días el valor del kW-h era $526 y ayer fue de $200 por kW-h.@EPMestamosahi

— Jorge Andrés Carrillo (@jaaacarrillo) January 26, 2023

Above photo courtesy EPM

• Yellow River CO LTD
• Power China International Group Limited Colombia Branch
• Schrader Camargo SAS.

Schrader Camargo already has won the contract to finish turbine units 3 and 4. Medellin Mayor Daniel Quintero (above) demanded that the initial contractor, CCC Ituango, who had been working on the project for a decade, renegotiate the existing contract, which they refused, leading to litigation and public acrimony. Almost two years ago, the president of EPM’s largest labor union, SINPRO, Olga Lucía Arango told Finance Colombia “There has always been a suspicion of a possible hiring of a Chinese company for the completion of the work.”

Now it seems that Arango was correct. The Ituango PC-SC Consortium presented a bid of $991 billion pesos, or just over $200 million USD, even though independent consultants have strongly warned against it. For example, according to a 432 page independent report submitted by engineering consulting firm Pöyry/Afry, further delay in finishing the project, bringing all eight turbines into production, also creates structural risks for the dam because of the stresses of the river flow going over the spillway or through bypass tunnels instead of through the generation turbines.

Engineer Santiago Ortega, director of Innovation at Emergente, agrees with the councilor, who believes that the change of contractors could delay delivery schedules by up to a year. “The project could have a delay of at least one year and, in addition, it reduces the traceability of the project, the responsibility in the design and execution of the works and also ends up increasing the global cost,” Ortega told Colombian outlet BLU Radio.

According to Medellín newspaper El Colombiano, Yellow River asked EPM to reduce the required construction experience from 94,500 cubic meters of tunnels, canals, landfills and bridges down to just 28,250 cubic meters of experience, which EPM agreed to, tailoring the bid to Yellow River’s favor.

EPM has until March 6, 2023 to formally contract with the consortium, postponed from September 6 of this year. The bidding process has been prolonged five times.

Regarding the last four turbines:

• Unit 5 is scheduled to enter operation in December 2026
• Unit 6 is scheduled to enter operation in January 2027
• Unit 7 is scheduled to enter operation in March 2027
• Unit 8 is scheduled to enter operation in April of 2027

Though with the changes under way, there is little certainty to these dates.

• Neighboring Brazil’s presidential election
• A week of protests throughout Colombia
• The falling Colombian Peso
• Daily revolving chairmanship at Ecopetrol
• Petro’s land redistribution deal with the ranchers
• Daniel Quintero’s crisis at EPM and Hidroituango
• Some can’t miss events during November!

Just minutes ago in neighboring Brazil, former President Luiz Inácio Lula da Silva beat current President Jair Bolsonario. What does that mean for Colombia? Probably not a lot. Relations between the two countries have been cordial but quiet for a long time. It can be said however, that leftist Lula will certainly get along well with Colombian president Petro, so maybe some good will come of it regarding the protection of the indigenous population, combating illegal deforestation, and protection of the Amazon Rainforest, that spans both countries.

We are coming off a week of protests in Colombia. Last weekend there were small protests in Cali, Medellín and Bogotá against President Petro and his proposed tax reform and calling for the resignation of the controversial minister of mines and energy, Irene Vélez. There are thousands of workers in the petroleum sector, and some of them participated in the protest, fearing for their future employment.

This past Friday there were protests again in Colombia’s three largest cities, but by a very different group. Last week’s protests were full of businesspeople and petroleum workers. This weekend it was a loose movement called “Primera Linea” that translates as “Front Line,” or more literally “first line.” This is a diverse youth led movement made up of everything from university students to the disenfranchised and impoverished.

Now, there were violent protests last year during the Ivan Duque administration. Some people blame the protesters, a lot of people blame Colombia’s notorious ESMAD riot police. There are something like 20 people arrested during last year’s violence who are still being held, and these protests were to demand their release.

Now as an outside observer, there is something odd I see often in Colombian justice. So these people are detained for vandalism, but haven’t yet been prosecuted or sentenced. On the other hand, you have cases like just last Thursday, a mother was captured for throwing her baby in the trash after she was caught by neighbors and immediately released by a judge.

One serious problem in Colombia is that people are afraid to report crimes because the criminals aren’t detained and go after the victims in retaliation. So, whether these vandals are guilty and deserve to be punished or detained or not, there are some evident iniquities in the justice system that need to be addressed.

Now, the peso has fallen. A year ago, it was around 3800 to the dollar, now its at 4819 to the dollar. That’s a big fall. There are compound reasons for this.

• Supply chain disruptions that are affecting everyone globally.
• Petro’s threat of capital controls
• Uncertainty about the future of the petroleum industry
• A $100 million USD loan from the UN to buy land from ranchers and give it to disadvantaged groups, victims of violence.
• Uncertainty regarding Colombia’s 13+ free trade agreements

Colombia’s state-controlled petroleum giant, Ecopetrol faces an uncertain future. The company trades on the New York Stock Exchange under the symbol EC but 88% of the shares are owned by the Colombian government. The giant question is: how will an anti-petroleum president treat Ecopetrol over the next four years?

President Petro needs a profitable Ecopetrol to feed his ambitious social agenda and pay Colombia’s worrying sovereign debt, but Petro is explicit about wanting to kill off the petroleum industry over the long term, and has pledged no new production or exploration permits under his administration. This is something to watch closely.

Speaking of that, last Monday a new board of directors was ratified, and Carlos Gustavo Cano was elected chairman. But less than a day later, he was booted from the position and replaced by Saul Kattan. What’s going on here? Not a good look for a publicly traded company with a $20 billion dollar market capitalization.

Nothing against Saul Kattan, he ran Bogotá’s telecommunications company ETB (Empresas Telefónicas de Bogotá) when President Petro was the mayor of Bogotá. So it appears that Petro wanted to install someone close to him, or at least someone he has a relationship with, as the chairman of Ecopetrol. Still, what happened between Monday and Tuesday?

Moving to Medellín, there is drama and tension at city owned utility conglomerate EPM (Empresas Públicas de Medellín). Practically everyone is pulling for the Hidroituango Hydroelectric project to be a success and come online quickly. But Medellín Mayor Daniel Quintero has politicized the project and inserted it firmly into his populist narrative.

Quintero even from his campaign for mayor in 2019 set out to demonize the construction consortium building the dam, and after taking control of EPM as mayor, instructed them to rebid the construction, disrupting the construction schedule. Now, the current contract expires December first, and after postponing the tender process four times, there is no certainty as to who will finish construction. Right now, not one of the eight turbines are operational, only two are even installed physically in their chambers. There are no turbines present or installed in the other six spaces.

I have spoken with the Olga Lucia Arango, the president of SINPRO, EPM’s largest union, and she said that Quintero seeks to bring in a Chinese firm to complete the work, supplanting the local contractors. A source within EPM did confirm to me that a Chinese entity is participating in Quintero’s rebidding process.

Now, if the Hidroituango hydroelectric project is not feeding electricity into Colombia’s national electrical grid by the end of November, EPM faces a $170 million dollar fine. For comparison, the national government is looking for a $100 million dollar loan from the UN. The city of Medellín.

On top of the penalty, there are firm energy obligations of $5.7 trillion pesos, or $990 million US dollars that EPM would be on the hook for, so these machinations have put EPM and Medellin’s budget at serious, serious risk.

After taking over the project, the mayor first said that Hidroituango would generate electricity on his birthday, July 26. It didn’t happen. Then he said October 15. It didn’t happen.

Now he has both politicized and personalized the project, and is facing dire consequences. Feeling the heat, and obviously frustrated, the mayor is lashing out at whoever, in his imagination, wants Hidroituango to fail. On October 11^th he sent a tweet saying, and I translate here:

“The rats want Hidroituango to fall. That we run like them, that we change designs, and do things poorly to equalize our luck with theirs. Hidroituango will only start when the last test tells us that everything is good for the project and the people.”

Now, it was Quintero that came in and ran off the contractors, so who exactly is he referring to?

As an EPM customer and ratepayer, I certainly hope Hidroituango is a success, for consumers, for Medellín, for Colombia, and for the international investors who have backed the project.

Events to attend:

CGS Medellín 2022 – November 8-9            https://colombiagold.co/

Miami Rum Renaissance – November 12-13            https://www.rumrenaissance.com/

Petro at 100 Days: Perspectives for International Investors – November 9 https://www.medellinglobal.org/events/cafe-conversatorio-con-colombia-risk-analysis/

Cleantec Show and TecnoEdificios – November 22-23       https://www.tecnoedificios.com/en/ https://www.cleantec.show/en/

Bonds & Loans Latin America & The Caribbean – November 29, 30            https://bondsloans.com/events/latinamerica Remember to register with code FC20 for a 20% discount!

pic.twitter.com/W0szZo5bAi

— Daniel Quintero Calle (@QuinteroCalle) October 21, 2022

This comes a month after, during the Clinton Global Initiative event in the US, he announced he would ban the sale of gasoline vehicles, which legal experts promptly poo-pooed as illegal and unenforceable, pointing out that mayors have no such power.

A partir del 2035 en Medellín no habrá venta de vehículos a gasolina. Este es un paso más por nuestro planeta, por su futuro. pic.twitter.com/tHXz2yrVIo

— Daniel Quintero Calle (@QuinteroCalle) September 21, 2022

Taking real action against emissions or Medellin’s dangerously high pollution would be laudable and is urgent. While Medellín, based at the bottom of the Aburrá Valley does suffer from serious pollution caused largely by hydrocarbon emissions, the mayor seems intent on winning friends and influencing people abroad with these moves, as when the decree would supposedly come into effect, he will be long gone. Quintero’s term as mayor runs from January 1, 2020 through 2023, and re-election is prohibited.

Quintero is pretending to make administrative decisions for a mayoral administration three terms into the future.

“Pico y Placa” or the restriction of vehicle circulation based on the coincidence of license plate numbers with hours or days of the week is common in Colombia and other Latin American major cities, and in Colombia, the municipal administrations do have significant authority to periodically adjust the measures based on traffic and meteorological conditions.

For this very reason, Colombians realize that using Pico y Placa regulations to ban personal vehicles 15 years in the future, more than a decade after the mayor leaves office is profoundly risible, but the mayor is not an idiot. What could be the motivation? The locations of the mayor’s recent decrees offer clues. Both of these publicized announcements took place thousands of miles away from Medellín, in front of foreign audiences uninterested in and unaware of local political machinations.

In just two years, Quintero has gone out of his way to make powerful enemies at home in the valley. He likes to blame “Uribistas,” or followers of embattled former president Alvaro Uribe, and they certainly oppose him; but his opposition has grown far broader. He has attacked virtually the entire business community, and even has gained the enmity of major labor unions.

He was elected mayor as an unknown, a humble engineer from a poor neighborhood on the north side of town, raised by a single mother who died while he was still a student. A compelling story, and many from across the political spectrum were glad to see someone from outside the almost incestuous political clans break through.

But Quintero wasted no time revealing himself to be a populist class warrior, sowing chaos in Medellín institutions from business incubator Ruta N to utility conglomerate EPM through to EPM’s TIGO telecommunications affiliate and Hidroituango hydroelectric project. The drama even led to global ratings firm Fitch downgrading EPM’s credit as a bond issuer to one notch above junk bond status due to: “a deterioration of corporate governance controls at the company.”

Quintero worked especially hard to earn the ire of Grupo Empresarial Antioqueño, an informal “Keiretsu” or business alliance of most of Medellín’s largest companies, including Bancolombia, Grupo Sura, Grupo Argos (Argos Cement, Conconcreto Construction, others), and Nutresa, among many smaller companies and affiliates.

Quintero certainly has political ambitions beyond city hall, but he has perhaps unwittingly built a tremendous alliance from corporate executives to union bosses and civil society, ready to oppose him. He is no longer an unknown.

Perhaps this is why the mayor is spending so much time abroad networking with global civil society. He has a young family to look after, and in his early forties, a stint abroad might be a good financial and career move. Former President Ivan Duque spent much of his career in Washington, and deeply unpopular at home (even disdained by his own party of Uribistas) wasted no time returning, being named just two days after leaving office to a Washington DC fellowship at the Wilson Center think-tank (to “emphasize the importance of climate change,” no less)!

I am honored to announce that former President of #Colombia @IvanDuque will join @TheWilsonCenter as a Distinguished Fellow. His global focus will emphasize the importance of defending #democracy, climate change, and migration in the #Americas. https://t.co/rA5jS9M7jI pic.twitter.com/StdY8ael72

— Mark Andrew Green (@AmbassadorGreen) August 9, 2022

Current Colombian ambassador to the United States, former governor of Chocó, and former environment minister Luís Gilberto Murillo even had to renounce his US citizenship to become the ambassador, so working abroad in policy positions a respectable , even savvy step for current and aspiring Colombian politicians.

Thus in this context it may make sense that the mayor is emitting quite a bit of carbon “building a brand,” flying up and down the planet to win friends and influence people. His sole term as mayor is over the end of next year. Issuing and publishing decrees that he knows have no legal binding in front of adoring foreign audiences can make a lot of sense when one is thinking about the future…

That would be the mayor’s future, not the planet’s.

Filed as: Editorial Opinion & Analysis

From SINPRO we see with great concern how in this administration there have been repetitive changes in the EPM structure and appointments that affect the transparency and the rigors that have characterized our company.

In addition to the cases that we have made public, we now warn about the latest moves: the appointment of the new Vice Presidents of Legal Affairs, Jonathan Villada Palacio, and from Human Talent, Juliana Carolina Zapata Molina; the appointment of two advisers for the new manager of Afinia; the settlement of the new IT structure attached to the Vice Presidency of New Businesses, Innovation and Technology; and that of the Identity management, attached to the Vice Presidency of Communications.

SINPRO President Olga Lucia Arango

Historically, we have asked EPM for an administrative structure in accordance with institutional principles and technical rigors, leaving no fissures for politicking, bureaucracy, nepotism, cronyism and corruption. For example, in 2018 after the contingency of the Hidroituango project, we delivered a proposal for contribution to the sustainability of EPM, including the optimization of the structure.

In 2020, during the administration of the first of four EPM managers in 20 months—something never seen in 66 years—we warned about the fairness of appointments to high positions of managers and advisers, who did not correspond to the tradition of a company like EPM. With the new management’s arrival and with the approval of the board of directors, this practice did not change. On the contrary, it has become more evident, without shame.

A few months ago, and without questioning their possible academic merits, we warned about the appointments of the General Secretary, María Cristina Toro, and the vice presidents of Finance and Investments, Martha Durán, and Communications, Mabel López, upon the impression that quotas of politicians related to the government of Medellin were being filled.

The next step was the creation of the Administrative Management Department in the General Secretariat, despite the existence of the Administrative Support assigned to Supply Chain and Shared Services.

Mr. Manager and members of the board, you have underestimated these alerts, which we launched on the retirement of about twenty workers of all levels brought through extreme pressure and to which people of retirement age have also been subjected.

Finance Colombia has repeatedly offered the mayor an opportunity for an interview, or even to comment, but through his press secretary, he has always declined. City council member Daniel Carvalho has not in the past been aligned with any of the groups traditionally opposed to the mayor, such as traditional political parties or the Antioquia region’s traditional business elite. Still, the independent councilman and civil engineer has said enough is enough, and that the mayor’s mismanagement is putting Colombia’s second largest enterprise and Medellín’s single largest municipal revenue source at grave risk.

Carvalho was kind enough to sit down with Finance Colombia’s executive editor Loren Moss for an in-depth interview, below. The video interview is conducted in Spanish, English transcript follows below:

Finance Colombia: The situation we have with the metropolitan government, the City Hall and EPM. There is a huge concern on what’s happening, and I want to understand your point of view. We’ve had four managers in the last year, and the investors ask us if EPM is in danger or not, if EPM has the capacity to respond for their bonds and debts and I want your opinion the uncertainty, not only on the management, but we also had SINPRO here in our interviews, but what is happening with Hidroituango. As a councilman of Medellin, I want your opinion on the biggest concern of the situation here, between EPM and the city of Medellin, its owner.

Daniel: EPM, as you know, it’s said that EPM is the crown jewel of Medellin, right? It means that it’s a public company that is very successful and provides resources to Medellin. It’s not very common, you know that the last forty years, the trend to the neoliberalism was about that if public sector is not being efficient for managing companies and services, sell it to the private sector, right? That’s the story in the west. EPM didn’t do that. It wasn’t sold to the private sector, it was kept as public and achieved success, but why?

I think that is why I tell you this story, because EPM allowed the private sector to teach the company how to work efficiently. That learning, that rule on how to make a public company be successful and not driven by the political interests of the moment, is what we call the corporate governance, those are the game rules, the company should work in a determined way, not what the mayor in charge orders, and that’s what we’ve been building for 50 or 60 years in EPM, and it has become  the second largest public company in Colombia after Ecopetrol, and I think that EPM is one of the exemplar public companies of Latin America. I don’t have reference of another one that is equal to it.

Finance Colombia has repeatedly offered the mayor an opportunity for an interview, or even to comment, but through his press secretary, he has always declined

So, the successful story of EPM has been based on mostly in the comprehension of the fact that being public it can’t be managed as the politicians often do. Besides, in the last 20 years, EPM has had a big expansion in the international market, so before EPM technically provided services to each municipality, it has grown in Colombia. We already have Aguas de Urabá, we have a lot of other subsidiaries. We just acquired Electricaribe, but we have also grown as a multinational. That has been interesting, and at least a third of the profits of EPM comes from businesses abroad, so we can see a history of success in EPM.

Now, when one jumps to the international market, and you go to make business, sometimes you win, sometimes you lose. Every job requires effort, nothing guarantees success in investment. There are examples in Panama, in Mexico for bad investments, also in Chile, there are mistakes, but it’s also part of the game of investing. I invest, that’s how it is.

Many years ago the idea came of ​​doing Hidroituango, a project that had been on the plate for 40-50 years, and just 15 years ago was when it’s started. The concession was given 10 years ago. It’s the biggest project in Colombia, providing 15-20% of the energy that Colombia needs, and everything was doing great, until such thing happened, right?

Who’s responsible? I don’t know. I’ve no idea. I’m a civil engineer, I was there before and after the internal failure, so I don’t know, the paperwork [investigation] is being done, right? Despite that, the problem of Hidroituango arrived in a very particular moment. Three years ago, during the presidential campaign, immediately it became an issue of interest for the political debate, because a bunch of politicians from Antioquia had ties to EPM. I mean Sergio Fajardo, Anibal Gaviria; so it became a political thing, and when things become too political, they stop being transparent.

That political earthquake was beneficial for some people to say that EPM was carrying 20 years of bad management, corruption, and blaming people, starting with Daniel Quintero, who used it to build and idea, so the people were upset for the collapse of the Hidroituango tunnel, so they felt that speech made by Daniel Quintero called them out in a very unfair way. He never presented data, he just accused them of corruption.

I asked the management of EPM, and there is no single complaint of corruption. In 10 years, there isn’t, so [Quintero] created a campaign on it, and after winning, he keeps the same speech about EPM being badly managed and that he will arrive and save it. That’s what he says. What I think is behind it and it’s different, is that in the last 20 years, in Medellin there was a political coup. I mean, the parties that were used to being in power; a different style arrived, much more technocratic, transparent, more citizen-oriented, and that was the base for what we know as the Medellin Miracle, the physical and social transformation, partly financed by EPM’s money.

That movement removed the people who were on top before, for example Luis Perez, who was the mayor before Fajardo, and had a number of scandals in EPM. We hadn’t seen such a season at EPM since Luis Perez, so those political and economic groups who were substituted in Medellin kept growing in the rest of Antioquia, and now with Daniel Quintero, supporting them in disguise, because they know a traditional politician doesn’t win in Medellin, who wins is a young independent politician, so they supported Daniel Quintero, and since he won, now they want to go for the revenge.

“Lucky for us, EPM is such a solid company, loved and respected, with a committed staff that has continued to protect the company from the government…”

They want to destroy what was done in 20 years, not only today, but in retrospect destroy the story that was built in Medellin and the world, on how we left the barbarian age of the 90’s. So it’s also a political, economic and historic struggle to rewrite the success story of the city and EPM, so they’re behind. According to me, there is a revenge and a big opportunity to take over the power again of such a big profitable company that manages huge resources, and particularly, the Hidroituango project, which demands billions and billions of pesos, so there is a lot of money, and it must be such a project of interest, so according to me that’s what they want, recover this and get their revenge.

Lucky for us, EPM is such a solid company, loved and respected, with a committed staff that has continued to protect the company from the government, and as you said, in a year and a half it has had four managers already, if their intentions aren’t the most reliable ones, then it’s also because they are not good managers. They pretend to blame the opposition, but we have to remember is that the first manager was appointed and dumped by him [Quintero], and the manager is suing today, so it’s supposed to be our fault, Fajardo’s fault, the opposition’s fault, He [Quintero] creates the problems himself, I call him the pyro bomber.

Finance Colombia: Something I want to ask, EPM is a multi-billion-dollar company, and in general, even though the city owns it, the board of EPM, the managers have been professionals, engineers, experts in electric energy, or public service, but something I saw when the board was replaced, there were many people, I guess they are honorable, but just a few seem qualified for corporate management. If you criticize his decision, he says you must be controlled by Group Antioquia. I personally don’t know anyone there.

Daniel: And you’re compromised by Bancolombia!

Finance Colombia: I don’t have any leverage with them, I wish! If they want to come to us and advertise or something, that would be good, but we have no ties to anyone. We’ve contacted the mayor many times, as well as with you, with SINPRO as well, where Olga Lucia Arango gave her point of view. But what concerns me is that the last person who resigned was only experienced running a micro-business, he was in charge of some small positions here and there but he didn’t have enough experience in leadership of any company, so how would he deal with a multinational company?

Now the new person appointed as his replacement, I think he is also someone of respect, at least he is a civil engineer, but I think he has a lot of connections inside the government, he’s had many positions in the government, but I don’t see a lot of experience as a leader, as an executive. The board, I mean there are kindergarten teachers, and I come from a family of teachers, which is good and respectable, but what I don’t see is any qualified people with a resume of being executive leaders of any big companies, from Medellin or any other parts of the country. In general, big companies, should have people who know what they’re doing. So I want your opinion there, if we have as we say in English, checks and balances, to maintain the independence of EPM if that’s the case, why? And if not, what can we do?

Daniel: What I really see them doing is destroying that balance. When the board was changed, let’s remember they resigned, which was appointed by the mayor, then they put in a whole new board. The vice-presidents of EPM, who are solid, have also been starting to change, so I think they are dismantling what had been done with the corporate governance: how to manage certain things, how to choose a board. I think they are dismantling what had allowed EPM to be successful, and be an efficient public company, which is odd nowadays, they are deleting what we had achieved.

What did the mayor say when he fired the manager, his friend? He said “I need a manager that is more according to my orders,” so that applies for the vice-presidents as well, which becomes…We go backwards, without corporate governance, where the politician is the most powerful and the one that does it all. Now, what can we do and what are we doing? First, from the political matter, you see, the latest manager, why did he have to leave? Because the political oversight proved that he was lying on his resume, which is related to the political oversight in telling the mayor: “you can’t do anything you want here,” and on the other hand, there is citizen oversight, where a lot of people investigate, for instance SINPRO, the union; who knows better the inside of EPM than the union? So I think that bad actions of Daniel Quintero in general and in EPM have awakened the citizens.

Finally, I must say it as well, EPM has a story, institutional knowledge and public servants that help guarantee the respect and continuity of the good practices. I hope, and I’m convinced that EPM will survive this bad moment, but in order to achieve that it’s the work of all of us to tell the mayor to be careful, telling the mayor he can’t do what he wants.

Finance Colombia: When we scheduled this interview, it was all before the recent events of the last month, nationally. And we have a situation, there is a polarization in politics today. I, as a North American have seen this happening as well, but also in the Americas. In Peru we have from the right wing against another from the left wing, and so on. Now that the people rejected this tax reform, obviously the country is facing a deficit, a void, a problem that is putting Colombia’s international credit in danger, and there are many Colombians out in the streets that don’t understand what that implicates for the Peso. To look beyond financing, it will also be more expensive to buy goods.

So my question is, what can the government do in Medellin, in the international field as well, we have elections next year—I’ve seen as you said on Twitter, a change in the attitude, obviously a change in the police as well, but what can the national government? Because Colombia has to prepare a tax package one way or another, so what can be done to clarify the situation and advance forward?

Daniel: The first thing we have to know is that these protests are not only because of the tax reform, let’s remember that you were here in 2019 when there were protests already, in the beginning of 2020 as well, and the only thing that tamped it down was Coronavirus. So I think the tax reform was just a lighting up of what was coming already, so the people are in the streets because of a lot of things, right? The people feel bad about the government, they feel the inequity in Colombia is huge, nowadays people are more educated, cooperative, demanding. Look, an easy example: I was born in 1979 in the very dangerous Medellin. When I was young, before moving to France, I never went to a protest, we were afraid of being murdered. This generation is not afraid anymore. So we are using our citizenship that wasn’t being utilized before. I just want you to understand that the protests are not only because of the tax reform, and what has been happening has only increased the rage!

“When I was young, before moving to France, I never went to a protest, we were afraid of being murdered. This generation is not afraid anymore.”

I think there are 70 missing people, 20 or 30 deaths, that isn’t because of the tax reform, it’s because of the bad management. What can the government do? I understand the need for the reform. This would be the third reform in three years, so it’s like: We can understand the need of the reform, but when they tell you that you have to give more, but on the other hand you see the money flying away, you don’t feel it’s right. Besides, they announced a billion-dollar purchase of war elements, 10-12 million in aircraft, people are starving, the health crisis, there are not enough vaccines, businesses are closing, people are losing their jobs, buying 10 billion pesos in war material is necessary?

People won’t understand how it is more important to buy a warplane than propose aid to the people. The government has that problem, and besides they don’t have full legitimacy and just one year left. I think they have to make a call to a reform, maybe not so ambitious, but that generates consensus, followed by austerity measures, not towards social investment, but the functioning expense, because people don’t understand either that a senator makes 30 million pesos a month. There is a lot of waste, so the solution is not only technical or economical, is a technical and political solution, it has to count on the support of political forces so the people can be calmed, knowing it’s necessary and it’s fair.

Finance Colombia: And they haven’t done that until now. When they try to sell it they screw up talking about $1,800 peso (40 cents US) eggs.

Daniel: It’s been dumb. The egg thing has become the symbol of the people’s disagreement. If you don’t know how much an egg is worth!

Finance Colombia: How can you put that on people?

Daniel: The people are right by being upset, and the worst is that they withdrew the reform, and the president showed up yesterday calling his allied forces to discuss this. Same with the same. We’re walking towards the same mistake, and the people will remain upset.

Finance Colombia: The opposite, I think we have the same problem in the US. In the las 2-3 administrations, it was like “that was Trump’s fault, that was Obama’s fault” but when you go back to Reagan, who was a Republican, and Tip O’Neill who was In the Congress, they were opponents but were able to negotiate everything, and close deals without being friends. So, what they have to do is negotiate with their opponents.

Daniel: That’s politics, talk to the people who think differently.

Finance Colombia: That leads me to my other question, here, you are very well known, but for our readers; we have 30% in Colombia, but mostly abroad, they are investors in  Colombian companies, in EPM, sovereign bonds, they look for opportunities here in Medellin. Who is Daniel Carvalho? Tell us so the readers and the people abroad understand your position on city council and your story, and political affiliations: He is with Quintero, or with Petro, or with Uribe? So the people understand your point of view and who you are.

Daniel: I’m Daniel Carvalho Mejia, I’m 42 years old, born and raised in Medellin, I got a civil engineering degree. After that I moved to Paris, where I studied a specialization in urbanism and sustainable development, and after 8 years there, I came back to Medellin, precisely because urbanism was emerging here.

I arrived in…I was never interested in politics, but when I returned to Colombia, I understood that Medellin had transformed thanks to the political will. So I got the importance of politics, I got involved into a bunch of causes, since today politics is more about causes than ideologies; I got involved into environmental causes, sports and culture as well. So that, plus my academic profile gave me recognition in the city, which made me realize that those causes I stood up for had no representation in the local political field, no one was speaking about it, so I said, why not?

Vale la pena preguntarle al Alcalde cuánto están poniendo sus amigos para la cultura.
¿Cuánto puso Luis Pérez y Cesar Gaviria?
Cuánta de la plata que está cogiendo la Reforestadora el Líbano se está devolviendo para la cultura de la ciudad.

— Daniel Carvalho (@davalho) June 22, 2021

Why not me? So, since I never had had any party affiliation, I got into an independent movement, I ran the cheapest campaign, collected signatures. I spent 10 million pesos ($3500 USD), a social media-based campaign. I won 6 years ago, and I won a second time, what I’ve done is to take the technical knowledge as a street activist to the Council, let’s say I have an interesting profile because it combines—I mean, it’s weird that people have this hair, yes, but I also have a diploma from the University of Paris. It’s a street and academic mix in me, and if I had to define myself ideologically, I’d say I’m a centrist person. I don’t fall into extreme positions because I think they cause huge damage, they produce violence, so I consider myself a centrist ideologically. That’s my quick resume.

Finance Colombia: Excellent, so, you won a seat for specific district?

Daniel: In Medellin we work for the whole city, there are no districts.

Finance Colombia: Alright.

Daniel: What do I do? I focus on specific issues, those like sustainability, cultural creativity, diversity, gender equity…and football issues.

Finance Colombia: (the two football clubs based in Medellín) Nacionál or Medellin?

Daniel: Medellin!

Finance Colombia: We won’t tell my (Nacionál super-fan) mother-in-law then! Thanks a lot for your time, I hope this isn’t your last time in Finance Colombia.

Photos courtesy Daniel Carvalho

The letter of resignation came just hours after a contentious press conference where Calderón wished to discuss his investment plan for the utility operator, but the press, including Finance Colombia, wished to delve into the numerous gaps and inconsistencies in his qualifications, including:

• He was presented in writing as having a Harvard MBA and degree from The University of California, Santa Barbara—He has neither, but does seem to have a Master of Liberal Arts from the Harvard Extension School.
• His resumé lists his work from 2016-2020 at a firm “C&C Gold” that he founded and owns and has a value according to records Calderón filed of $16,000 USD. During the press conference he stated that the company was inactive, begging the question as to why it was listed as his employment for four years, and if so, what were his activities.
• Other journalists brought up his alleged involvement with entities entangled with the Mossack-Fonseca “Panama Papers” scandal, and whether he was appointed out of personal loyalty to embattled Mayor Daniel Quintero, who is facing a recall campaign in Medellín.
• Finance Colombia’s questions were not answered during the press conference. Afterwards they were re-submitted to EPM. Those questions, now moot, were:
  • What is the largest team of direct reports (hire/fire authority) that Mr. Calderón managed up to this point in his career? (What function, what company?)
  • What is the largest P&L Mr. Calderón has been operationally responsible for—As a manager or executive, not as board member or advisor?
  • If C&C Gold (his company from 2016-2020) was an investment bank as he stated, what is the most outstanding merger, acquisition or capital raise that the firm can take credit for during that time period?
• Meanwhile, opposition Colombian senators leaked damning documents from the headhunting process where Mayor Quintero sought to appoint Calderón as auditor in Tigo UNE, the telecommunications company co-owned by EPM and global telecommunications giant Millicom. In the document, the executive search “headhunters” evaluated Calderon, citing his personal friendship with Mayor Quintero, that he sought to be the mayor’s “eyes and ears” inside of Tigo UNE, but he was not remotely qualified for the position as auditor. The headhunters also indicate that no, Calderón does not have an MBA from Harvard—as EPM later stated in a written communication, nor adequate experience for such an executive position as vice president, much less CEO. Finance Colombia was able to indeed confirm the veracity of the leaked documents.

Marcelo Cataldo, presidente de Tigo Une, pone a disposición del headhunter Carlos Rodríguez, la hoja de vida de Alejandro Calderón Chatet. pic.twitter.com/AcQYQLd0Nl

— Santiago Valencia G. (@sanvalgo) April 12, 2021

Since Quintero took his place at Medellín’s city hall, EPM, a multibillion-dollar corporation with operations from Mexico in the north to Chile in the south, has been plunged into scandal and crisis. The company which is supposed to operate independently according to a governance agreement, has billions of dollars of bonds in public debt markets, and its own rating, even though it is owned by the city of Medellín.

Timeline

1. December 2019 — Former CEO Jorge Londoño Resigned days before Quintero assumed office. Quintero publicly insulted Londoño during Quintero’s mayoral campaign, and Londoño didn’t want to be around to hand the baton to whoever the new CEO would be.
2. January 2020 — Mayor Quintero appoints Álvaro Guillermo Rendón Lopez as new CEO of EPM.
3. August 2020 — EPM’s entire board of directors resigns, except for the mayor himself, accusing Quintero of precipitating a collapse in corporate governance
4. August 2020 — EPM’s representative to the board of directors of Tigo UNE resigns in protest of the mayor’s governance and politicization of the entities.
5. August 2020 — Ratings firm Fitch downgrades EPM, citing a “deterioration of corporate governance.
6. August 2020 — Several financial entities with credit exposure to EPM suspend commercial relations with EPM, as revealed in a filing submitted by EPM to the Colombian government.
7. August 2020 — SINPRO, EPM’s largest labor union, holds a protest at EPM headquarters, and demands explanations for the CEO’s private gym despite the COVID pandemic, lease of an office complex in Bogotá, despite EPM being headquartered in Medellín. See Finance Colombia’s interview with SINPRO President Olga Lucia Arango here.
8. August 2020 — EPM announces a new board of directors, hand-picked by Mayor Daniel Quintero. The new board includes preschool teachers, politicians & attorneys, but is notably light on governance experience in large issuers of corporate debt like EPM.
9. January 2021 — At Mayor Quintero’s direction, EPM took legal action against the consortium of contractors building EPM’s Hidroituango hydroelectric project. Quintero moved several months earlier to initiate mandatory mediation. When those collapsed in January, Quintero instructed EPM to launch lawsuits against the consortium CCC Ituango, comprising Coninsa-Ramón H, Conconcreto, and Brazilian firm Camargo Correa.  Additional parties to the conflict include insurers Mapfre, Chubb, and Sura.
10. February 2021 — A conflict that has been simmering behind the scenes between Mayor Daniel Quintero and his own appointed EPM CEO, Álvaro Rendón becomes public, with the CEO of EPM daring Quintero to fire him, and accusing him of attempting a personal takeover of the utility, appointing friends and personal representatives, though EPM is expected to be independent and professionally managed.
11. February 2021 — EPM’s board of directors, installed by Quintero, fires Álvaro Rendón
12. February 2021 — Former CEO Álvaro Rendón denounces Mayor Quintero as a menace to EPM’s corporate governance and independence.
13. February 2021 — SINPRO, EPM’s largest labor union, warns the battles between Medellín’s Mayor Quintero and former CEO Álvaro Rendón are jeopardizing the health and stability of the conglomerate.
14. March 2021 – Rendón deposes Quintero: Colombia’s 18^thCivil Circuit Court of Medellin accepts a motion for evidence requested by former EPM CEO Älvaro Guillermo Rendón associated with a possible lawsuit, that requires a written deposition by Medellín Mayor Daniel Quintero.
15. April 2021 — Daniel Quintero via Twitter, & EPM via press release, announce Alejandro Calderón Chatet as the new CEO of EPM. In its announcement of the appointment, EPM clearly states (in Spanish) that Calderón is an economist with a specialization in business administration and economics from the University of California (it does not say which), and a masters in business administration (MBA) with an emphasis in finance from Harvard University. Both statements would later be revealed as false. Finance Colombia in its initial reporting, left out Calderon’s listed educational qualifications, because they seemed suspect.
16. April 2021 — Calderón holds a press conference with the media, while both the mayor and EPM send out statements in support of Calderon. Colombian media questioned Calderón’s qualifications, educational background, career, and connections with people implicated in the Mossack Fonseca “Panama Papers” scandal. Finance Colombia submitted questions, but they were not addressed during the press conference. Meanwhile, documents are leaked that show the headhunting firm that considered Calderón for a lesser position at EPM affiliate Tigo UNE rated him as significantly underqualified for the role.
17. April 2021 — The night of April 12, just hours after the press conference, Calderón submits a letter of resignation to Mayor Daniel Quintero.

EPM is now without a permanent CEO, facing lawsuits along with the challenges of finishing and bringing the mammoth multibillion-dollar Hidroituango hydroelectric dam online before facing a multimillion-dollar penalty for breach of electrical supply commitments, and facing the lawsuits of the very contractors building the dam, along with absorbing its recent purchase of the electrical utility for Cartagena and the surrounding regions. The Electricaribe purchase (now called Afinia) was organized by the Colombian government because the coastal provider, owned previously by Spanish utility Fenosa, literally “could not keep the lights on” and now faces significant capital investment and operational overhaul to bring local electrical service up to OECD and even Colombian local standards.

As if these challenges were not enough, Mayor Quintero himself is facing a recall election that was organized less than a year into his term as mayor of Medellín. He has somehow managed to unite labor and Medellin’s corporate leaders…against his leadership. The drama of the past 16 months has left EPM in a precarious position, struggling to maintain its managerial independence, corporate governance, and international creditworthiness.

Quintero’s appointment of Calderón in the first place, speaks loudly-in a very negative way, about Quintero’s own judgement or ability to govern effectively. Will Mayor Quintero and his board back off and seek professional, independent  management, or will they double down in their attempt to convert EPM into a tool of political loyalty? Will a professional CEO with the experience that EPM requires, even be willing to step into a politically charged dumpster fire? The next two months will be critical for the utility’s future.

Since his inauguration, Finance Colombia has, through his press secretary, offered numerous occasions to Mayor Quintero to interview, or even respond with comments to written questions. The mayor’s office has chosen not to engage.

At SINPRO we have always been consistent with all city administrations and EPM in the sense of seeking political and social control so that the institutionalism and corporate governance of the company is respected.

The confrontation and the battle of egos between the manager of EPM and the mayor of Medellín deepens the institutional crisis of the second most important company in the country.

SINPRO President Olga Lucia Arango

Faced with this new chapter of the breakdown of EPM’s corporate governance by both parties, At SINPRO Professionals Union, which is the majority labor union in the company, we reaffirm our thoughts and alarm.

Today, when we once again see that these struggles are placed above collective interests, we ratify our position in favor of EPM and the city. Faced with this unfortunate moment, we make a new call to all social actors to defend EPM from the appetites of those who seek to permeate it with politicking and along with it, corruption.

When we talk about corporate governance, we continue to have as a basis the current EPM – Municipality of Medellín Framework Agreement, ignored time and again by the mayor and the manager, for which we have asked for many months, the latter to take a step to remedy the damage that, in competition with Mr. Quintero, he has done to the company.

We insistently asked the mayor to choose the manager of EPM through an open and transparent process, a campaign promise that he did not fulfill and for which he must answer to the citizens.

Mayor and manager, today on opposite shores, joined forces to trample and crack EPM’s historic corporate governance, to ignore the technical, financial, legal, environmental, and social rigors of the company, and to disqualify the communications sent by more than 200 managers.

Each one, in an attempt to win this fight of egos, not only takes over and jeopardizes the sustainability of EPM, but they also seek all kinds of alliances to try to confuse public opinion.

All these unfortunate events that are taking place in EPM, today echoed by portals, the media and social networks, we have warned since the 2019 electoral campaign about the use of EPM as a battle horse. Today the consequences are being seen.

From SINPRO we have made several complaints about the actions of this administration, among them on hiring, another front in this confrontation between manager and mayor, both supported by “political groups” that support one or the other.

Faced with this panorama, it is up to the Board of Directors of EPM to take advantage of this historic opportunity to recover and enforce the company’s institutional framework, for which we reiterate the request, not only of SINPRO but of all citizens, that a process be started recruitment with a talent scouting firm to find a person with the necessary skills to run a company like EPM.

At SINPRO we are attentive to put on the stage of citizen debate any attempt to politicize and harm EPM. We will always be there.

Also See: Interview: EPM’s SINPRO Labor Union President Olga Lucia Arango Expresses Grave Concerns On Utility’s Leadership, Political Interference

“The EPM thing is not true, the manager has been doing a magnificent job in Empresas Públicas de Medellín and will continue to do so,” — Daniel Quintero

But now, Rendón is saying that yes, Quintero has repeatedly sought his resignation. The past year has been tumultuous and controversial for EPM, with mass board resignations, labor unrest, investigations, and at Quintero’s direction, a mammoth lawsuit against contractors currently building EPM’s troubled Hidroituango hydroelectric project.

In a scathing letter sent to the mayor, Rendón, who was until now seen as a puppet and conduit for Quintero’s micromanagement of EPM, acknowledged that the mayor has the right to fire him, but since Quintero instead was asking for his resignation, he would call an extraordinary meeting of the board of directors, all Quintero appointees, to discuss the request and its implications. Though EPM is owned by the city of Medellín, it operates as a multinational corporation owning several subsidiaries in Colombia and throughout Latin America. The utility also operates a telecommunications joint venture, TIGO UNE with international telecom company Millicom and issues billions of dollars of debt on the international capital markets.

Rendon’s letter is shown below translated, with an image of the original in Spanish, following.

Medellín, January 31, 2021

Doctor
DANIEL QUINTERO CALLE
Mayor of Medellín
City

Mister Mayor:

Regarding the request that you have made to me directly and by other means to resign from the position of General Manager of Grupo EPM, I want to express to you that I know and respect your authority legal to remove the official who exercises this position.

However, to the extent that you are requesting my voluntary participation in that decision, I want to express to you that the answer will be given to you officially after hearing from the distinguished members of the Board of Directors of the organization that I guide and evaluate the implications that an untimely exit may cause to all target audiences, and especially, the impact this may have on the capital markets, with the financial, investment and international rating consequences for EPM.

In order to evaluate these implications, and the resignation that you have repeatedly and by various means requested of me, and taking into account what the Framework Agreement for Relations between the Municipality of Medellin – Empresas Públicas de Medellín ESP says, I would like to request an extraordinary and urgent meeting of the Board of Directors.

I think it is necessary to analyze before that collegial body of company management, over which you preside, the possible effects of a resignation or removal, always thinking about the present and the future of EPM.

It is good to remember that the change of General Manager must respond to objective reasons, in accordance with the results of his management, and after carrying out an evaluation based on objective models, as prescribed by chapter 4.7 of the Corporate Governance code:

“EPM has an evaluation methodology for the General Manager, which is described in complementary documents that are part of the“ General Framework of the Group’s Corporate Governance ”, as explained in Annex No.3. In general terms, the Board of Directors carries out a systemic process that allows it to show achievements and challenges of the general manager’s stewardship in terms of their results and methods to obtain them (what and how), being able to use the General Manager’s self-evaluation, the evaluation by of the Board of Directors and the evaluation by the top-level management team; its results will be disclosed in the public rendering of accounts and in the Annual Corporate Governance Report. This mechanism will be applied at least annually.”

With this letter I reply to you and the country of the aforementioned request for resignation.

Sincerely,

ÁLVARO GUILLERMO RENDÓN LÓPEZ
General Manager EPM

CEO Alvaro Rendón Dares Medellín Mayor Daniel Quintero To Fire Him

CEO Alvaro Rendón Dares Medellín Mayor Daniel Quintero To Fire Him