"We plan to invest about US$700mn in water and sanitation"

Friday, March 25, 2011

Colombian multi-utility EPM has enjoyed a good start to 2011, reporting net income of 1.4tn pesos (US$740mn) in 2010, and acquiring majority stakes in Panamanian firm ENSA and El Salvador's Delsur for a total of US$200mn.

In the water and sanitation sector, the company is responsible for two of Colombia's most important projects: the Bello wastewater treatment plant and Interceptor Norte pipeline, both of which are at the tender stage. The two projects form the central part of EPM's plans to clean up the polluted Medellín river.

BNamericas spoke with EPM's deputy director of integrated water management, Edgardo Martínez, about the company's upcoming projects, its international expansion plans, and its business development goals for 2015.

BNamericas: Early this year, EPM announced an investment plan for 2011-13. Can you tell us about the main water projects involved in the plan?

Martínez: For the period in question, we plan to invest about US$700mn in water and sanitation.

The plan includes construction of the Bello wastewater treatment plant. By 2013, we will have invested US$400mn in this project. The facility will be ready in 2014, when we will complete the US$450mn investment.

The plant will have capacity to treat 5m3/s on average and will provide secondary treatment.

We will also build a pipeline known as Interceptor Norte, in which we will invest some US$50mn. That's the component we're lacking to complete the plan to clean up the Medellín river. The pipeline will connect the sewerage network to the Bello plant.

The Interceptor Norte will be built by 2013. Therefore, we will invest US$450mn in these two projects by the end of 2013.

We're also working on a water and sewerage network replacement and expansion plan. The plan will require an investment of about US$150mn. For the expansion of the networks, which includes incorporating new areas to the system, we will invest about US$100mn in potable water and sewerage.

These numbers are all estimates, but they add up to an investment plan of about US$700mn for 2011-2013.

BNamericas: Do you plan to implement tertiary treatment at the Bello plant at a later stage?

Martínez: Not in the immediate future, no. The sanitation plan we are carrying out involves the use of secondary treatment facilities. There are no plans to increase that treatment to tertiary in the short-term.

By carrying out secondary treatment, we will be able to meet with the environmental requirements imposed by the environmental authority, so will be complying with the country’s environmental standards.

BNamericas: How will EPM cover the investment plan? Will you receive support from the regional or local government?

Martínez: The government isn't contributing to the plan. All the money to be invested will be obtained from the rates we charge. The system's clients cover the plan.

BNamericas: You mentioned expanding services to new areas. What is Medellín's water and sanitation coverage at the moment?

Martínez: Our coverage in urban area is at 100%. The expansion areas are rural areas that are being incorporated to the city. We expand as urbanization plans are carried out and the city incorporates new areas.

The expansion plan I mentioned includes incorporating a rural area comprising a number of municipalities in San Nicolás valley, next to the Aburrá valley, where Medellín is located.

BNamericas: EPM is also replacing pipelines. Do you have an estimated water loss rate for the city?

Martínez: The water that is unaccounted for is about 35% of the total distributed. We're carrying out a plan to reduce that percentage to 30% in the next five years.

The national policy allows us to charge for up to 30% of water being lost, so this water is included in rates.

BNamericas: Can you tell us about EPM's operations in other parts of Colombia?

Martínez: There is an area comprised by five municipalities, known as Urabá, where we provide services, working together with municipal authorities and the national government.

We are also working in the department's western area, with a utility called Aguas del Occidente, and with a company called Aguas del Oriente in the eastern area.

We are beginning to provide services in the San Nicolás valley, in association with three municipal governments. There, we will build the networks and will operate the system in association with those local governments.

Another department we are working on is Chocó, were we will provide services to departmental capital Quibdó for seven years.

BNamericas: The company has previously mentioned plans to expand internationally. Are those plans still on the table, and are you looking to any specific countries?

Martínez: We're looking towards Mexico and Central America.

BNamericas: Have you made specific progress in that area? Is there a timeline for the planned expansion?

Martínez: We haven't concreted anything yet. We have projects on the regional level and are evaluating initiatives at the national and international levels.

We have established a number of goals for the year 2015 as part of our business development strategy, and that includes international expansion, among other things.

BNamericas: Can you tell us more about EPM's goals for 2015?

Martínez: The strategic goals established involve broadening our market and increasing our income by millions of dollars. The goals are distributed on the regional, national and international levels.

EPM's goal is to reach the end of 2015 achieving US$5bn/y in revenues.

Of those revenues, energy is expected to reach US$3bn: another US$1.5bn will be obtained through EPM’s telecommunications firm, UNE; and the water division will provide the remaining US$500mn.

Those are the goals we have established and we're working hard on our investment plan to ensure we achieve them.