Colombia's EPM eyeing LatAm expansion

Wednesday, April 4, 2018

In the third and final installment of an interview with BNamericas, Jorge Londoño de la Cuesta, CEO of Colombian multi-utility EPM, explains why the company is seeking new growth opportunities in Latin America.

BNamericas: In your opinion what is the role that non-conventional energy sources should have in Colombia today?

Londoño: Energy has three great values. It must contemplate three dimensions. The first one is that it be friendly with the environment. The second is reliability, and the third, cost. No technology today is that perfect, so what we need is a mixture, a joint matrix. Thermal generation, with gas or coal or diesel, is very reliable because you turn the machine on and generate energy. In terms of reliability, you have the best result. But it's not so good for the environment and it's expensive. Hydro is quite reliable but in these countries in the tropics, in moments of El Niño, it loses reliability. But it is more economical and it's environmentally friendly. The unconventional ones are the most environmentally friendly, but they are the least reliable. In terms of cost, they fall between hydro and thermal.

BNamericas: There has to be a happy coexistence ...

Londoño: Yes, we have to reach a compromise. We cannot bet only on the conventional because we will lose reliability. You cannot play with hydro only because in an intense summer we need backup. Every matrix must have some thermal support. We know that it's more expensive and environmentally it's not the best but we must have a backup because we cannot bring the country to a standstill. What will EPM do? We will handle everything together, obviously looking for the least impact on the environment, the lowest possible cost and the highest possible reliability.

BNamericas: How does EPM see plans for a new regasification plant in Buenaventura? The company will have some role in this project?

Londoño: One of the problems we had two years ago was that the Colombian energy system was very stressed. Why? Because there was an intense summer and our gas distribution system didn't work well. Then the thermal plants had to use not only gas but liquid fuels, more expensive still. So having gas supply in Colombia is positive, because it allows us to use thermal plants with a fuel that is not so bad with the environment and is more economical. If we have to use diesel, it's more expensive and creates more pollution. If we use gas it's less expensive and there's less pollution. So we are pleased to see that there's a generous supply of gas in Colombia.

BNamericas: Some oil and gas producers have expressed their opposition to the regasification project, saying that instead of importing gas, the government should encourage domestic production.

Londoño: My opinion in this sense is that there is already a regasification plant on the Atlantic that is good for the Colombian system. It gives more reliability and to put another in the Pacific gives much more reliability still.

BNamericas: How is the Ituango hydroelectric project? Is everything going according to schedule?

Londoño: Yes. We have three major milestones that we must meet this year. The first days of July we must fill the reservoir. The first days of September we must start the technical tests. That is to say that the transmission lines must already be built. EPM builds the plant but the lines are built by Isa. For the first of September I need the lines to be ready. On the first of December, we will be offering the first 300MW commercially to the Colombian market.

BNamericas: But opposition to the project by some local communities continues?

Londoño: These are issues that we know, we have been managing them. We believe that the demands or complaints that are being made have no basis. EPM has been doing all the processes with due diligence, complying with all Colombian regulations, all environmental regulations. We have been doing social development, not only what the law demands but much more. But in recent last months there are some groups that try to take advantage, either in political terms or in economic terms.

BNamericas: In January, EPM told the regulator of its interest in acquiring a majority stake in Gas Natural. Is there anything new there?

Londoño: At this moment what I can say is that we are still in the process of consultations with the regulators to tell us if we can move forward with this public tender offer.

We are simply interested in control, not necessarily 100%. With 51% we would be happy. We are in the process of sorting this with the regulatory authorities to allow us to proceed with this public tender offer, which we estimate may be towards the middle of the year. We don't believe that it can be done in the coming weeks but in the coming months.

BNamericas: It seems that you have a clear goal to expand not only in Antioquia but in Colombia as a whole.

Londoño: Yes, and in Latin America. We have operations in Mexico, Guatemala, El Salvador, Panama, Chile and Colombia. And what we are looking for is that the portfolio has, as they say, eggs in different baskets. It is to reduce risk and have more solidity throughout our generation of value. We are in different countries and in different businesses. We are in generation, in distribution, in drinking water supply and wastewater treatment and we are in gas.

BNamericas: What other markets in Latin America are within the company's plans?

Londoño: Obviously we know that today there are good possibilities to invest in Brazil and Argentina in the energy sector.

About Jorge Londoño de la Cuesta

Jorge Londoño de la Cuesta is a systems engineer from Eafit University of Medellín. For 27 years he served as general manager of Invamer, where he led market research and advisory strategies, business analysis and social media. He assumed the general management of EPM and the chairmanship of Grupo EPM in January 2016.

About the company

EPM is the largest utility (energy, gas, water and telecommunications) in Colombia. It operates in 123 municipalities in Antioquia department. In Medellín and the metropolitan area of ​​Valle de Aburrá, it serves 3.6mn people.