EPM aborts Gas Natural takeover bid amid Ituango crisis

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Friday, May 18, 2018

Colombian multi-utility Empresas Públicas de Medellín (EPM) has halted its pursuit of a majority stake in Gas Natural in the wake of the Ituango dam crisis, CEO Jorge Londoño said on Friday.

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In April, Londoño (pictured) told BNamericas that the company would launch a takeover bid for the Bogotá-based gas distributor by midyear as part of a Latin America-wide expansion.

But those plans have been dashed as the company seeks to avert "catastrophic" flooding following construction problems at the site of its US$4bn Hidroituango project in northwestern Colombia.

"For now we will use that money [intended for Gas Natural] to adjust to these new circumstances," Londoño told reporters on Friday.

HIGH ALERT

EPM says the emergency was caused by a landslide that blocked a tunnel used to regulate the flow of water between the dam's spillway and the Cauca river. Relief efforts have been hampered by weeks of heavy rain.

Riverside municipalities remained on high alert on Friday as the dam threatened to break its banks.

More than 6,000 people have been evacuated from their homes since Wednesday, when authorities admitted they could no longer control the rising floodwaters.

Londoño said 11,000 EPM employees and contractors were working to raise the dam's wall to at least 410m from its current level of 404m.

"We are not going to stop working. We want to be sure that the dam can cope with higher water levels in the future, including the next rainy season in October and November," he said.

Located around 170km northeast of Medellín, Hidroituango is Colombia's largest infrastructure project in investment terms.

A joint venture between EPM and Antioquia development agency Idea, the plant is expected to supply over 17% of Colombia's electricity when fully operational in 2021. Local officials say work on the 2.4GW project is around 85% complete.

EPM has said the crisis - which prompted the company to partly flood the plant's powerhouse to avoid overflowing the dam - will postpone the start of electricity generation at the site, previously slated for December.

INVESTIGATIONS

Londoño guaranteed that EPM would cooperate with authorities in their efforts to determine the cause of the incident.

The scope of investigations widened on Thursday when public prosecutors said they were probing allegations that public servants received illicit payments in the project's contracting process.

Londoño added that EPM, which is controlled by the Medellín city government, is unconcerned by a Fitch Ratings decision to place the company on negative watch.

"I don't see our financial stability being threatened," he said. "At the moment Hidroituango doesn't generate a single peso of revenue and the debts are over 15 or 20 years which allows EPM to adapt to the situation.

"We will continue generating cash flow. The group's Ebitda was 4.7tn pesos (US$1.6bn) last year. That hasn't been affected in any way by the Hidroituango situation."