How Colombia's EPM plans to spend US$5.3bn in 2021

Empresas Públicas de Medellín (EPM), Colombia's largest multi-utility, has unveiled a record 2021 budget of 19.2tn pesos (US$5.3bn) as it ratchets up construction work on its troubled Hidroituango dam project. 

The outlay, which represents a 13% increase on the company's 2020 spending plan, was approved during a meeting of EPM's board late Tuesday. 

"The figure corresponds to an exercise of planning and projection of investments for next year, highlighting the resources for the development of the Ituango hydroelectric project ... which will contribute to the stability and reliability of the Colombian electricity system," reads an EPM statement. 

An expected 8.8tn pesos have been earmarked for operating expenses, 6.7tn pesos for investments, 3.4tn pesos for debt servicing and 300bn pesos for cash availability. 

Capital expenditure is expected to reach 5.1tn pesos, or 27% of the total budget. 

In addition to Hidroituango, EPM said resources would be pumped into other power generation and transmission developments, 4.0 industrial revolution projects – including its smart cities program – and waterworks, gas services and new electricity distribution unit Afinia, among other initiatives.

The budget will be funded by free cash flow, income from utility bills, loan disbursements, an insurance payout for Hidroituango damages and dividends from local and international subsidiaries, the company added. 

HIDROITUANGO

Located on the Cauca river in northwestern Colombia, Hidroituango is Colombia's largest infrastructure project in investment terms. Initially budgeted at around 11.4tn pesos, the facility is now expected to require 16.2tn in a best-case scenario, representing a cost overrun of at least US$1.2bn. 

The latest forecast follows serious construction problems that have forced EPM to postpone the project's scheduled operational startup to early 2022, more than three years later than originally planned.

Last December, Hidroituango insurer Mapfre made its first payout of US$150mn related to costs assumed by EPM for emergency works. The project is insured for up to US$2.56bn.

During a company presentation in July, EPM chief executive Álvaro Rendón said Hidroituango's construction progress stood at 79%, having failed to reach a a midyear target of 82% because of delays related to COVID-19. He said the first turbine would begin generating electricity when the project's execution reached 90%.