IPPToday #281: EPM to sell US$1 billion assets to fund 2.4 GW hydropower project
- Empresas Públicas de Medellín
- Inter-American Development Bank
- IDB Invest
- Corporación Andina de Fomento (CAF)
Related M&A Transactions
- Empresas Publicas de Medellin sells 109.6 MW wind farm in Chile
- Empresas Publicas de Medellin sells Aguas Antofagasta
- Empresas Publicas de Medellin sells 10% stake in Interconexión Eléctrica
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Empresas Publicas de Medellin E.S.P (EPM) has announced an asset divestment programme expected to raise between COP3.5 trillion and COP4 trillion (US$1.13 billion and US$1.29 billion) to fund the completion of the 2.4 GW Ituango hydropower project.
Located on the Cauca River in northwestern Colombia, Ituango will produce approximately 16% of the country's overall installed capacity at full completion. This was originally targeted for November 2018, however in May this year construction was postponed indefinitely and the site evacuated following a series of landslides.
EPM now anticipates that commercial operations are unlikely to commence within 36 months. The remaining works are estimated to cost between COP3 and COP3.5 trillion (US$970 million and US$1.13 billion).
The Board of Directors of EPM has now authorised the sale of the company's interests in Interconexión Eléctrica S.A. (ISA), Aguas Antofagasta (Adasa) and Los Cururos wind farm. ISA operates an over 40,000km high-voltage transmission network deployed throughout Colombia, Peru, Bolivia and Brazil, and interconnections between Venezuela and Colombia, Colombia and Ecuador, and Ecuador and Peru. EPM owns a non-controlling minority stake of 10.17% in the company.
Adasa undertakes potable water production and distribution, as well as wastewater collection, treatment and disposal in northern Chile. Its operations include the cities of Antofagasta, Calama, Mejillones, Taltal, and Tocopilla. EPM purchased the company in 2015 for US$965 million and is not planning to retain any interest.
The 109.6 MW Los Cururos wind farm is located in Ovalle, in the Coquimbo region of Chile. Its construction represented an investment of US$228 million and was completed in 2014.
EPM is also planning to divest from minority holdings in Promioriente SAESP Gas Natural del Oriente SAESP, Hidroelectrica del Rio Aures SA ESP, Energy Management SAESP - GENSA, EMGENSA SAESP, Organization Terpel SA, Corporacion Financiera Colombiana SA, BBVA Colombia, Banco Davivienda SA and Paz del Rio SA.
It is estimated that this process of asset sales will take about a year.
In addition, EPM Group companies are being made to cut their budgets by 10% and the Board has postponed some investments that do not affect the provision of services.
EPM has emphasised that the proceeds of these divestments will not be used to pay particular debts. The intention of company is to avoid a decrease in its credit rating and maintain its debt profile at a sustainable level. Furthermore, the divestments do not reflect a lack of liquidity. EPM has a solid operating cash flow and is supported by previously secured credit lines from the Inter-American Development Bank (IDB), CAF - the development bank of Latin America, and IDB Invest, amounting to US$1.2 billion.