IDB Invest and EPM announce payment agreement

Company News    Dec 3, 2021 2:44 PM

EPM and IDB’s relationship has come to an early ending over Hidroituango. Will other EPM projects, indeed other Colombian projects be affected?

EPM explained that due to the uncertainty created by the effects of the second instance ruling of the Comptroller’s Office on the fulfillment of the milestones established in the Amendment of the credit agreement, EPM and IDB (Inter-American Development Bank) agreed to an early voluntary payment scheme.

The payment agreement is for the balance of a US$450M credit signed in 2017.

“This operation is developed in attention to the priority given by EPM to honor all its financial obligations, to its financial capacity and to the integral preservation of the long-term relationship of the two institutions,” EPM said.

IDB Invest had already warned in September that if the hydroelectric project did not start generating power as of June next year, EPM would have to assume its commitment and pay the debt in full. The company is anticipating that scenario and therefore made a payment agreement.

It is important to remember that in December 2017 EPM and IDB Invest signed a credit agreement as part of the financing of the Ituango Hydroelectric project.

“To date the balance of this credit is a total of US$450M. Subsequently, on March 30th, 2021, both entities signed an Amendment to the credit agreement,” EPM explained.

The company has signed a total of 12 loans with IDB and highlighted the “inter-institutional relationship of decades with the multilateral institution, an entity that has represented a relevant ally for EPM.”

Bottom-Line: IDB exists so that Latin American countries have the infrastructure they need to grow. The idea is that the bank’s investments create the capability to pay off the loans. The threat to call the loan was a wake-up call that the bank did not see evidence that EPM and the broader Colombian political elite was taking the project seriously enough.

Instead of addressing the concerns, EPM – or more likely Mayor Quintero – decided to pay back the loan early and cut off the criticism. If you are going to criticize him when things go wrong, he will take his toys and go home. No doubt this is why the mayor seems keen to buy out the rest of the partners.

Some commentators wonder if the IDB will decide it has had enough, not just of EPM and Mayor Quintero, but all of Colombia. Hidroituango is a pretty horrific example of how badly the nation’s elites manage the bank’s – and Colombians’ – money. Maybe the bank would achieve its goals for the region better if it put its money in countries that take building infrastructure seriously.

Which brings up the question “How did Quintero pay the IDB?” Where did the money come from? If from the city or EPM treasury, what was it going to be used for and how does he plan to replace it? Or was it a loan from someone who was not going to criticize EPM and/or the mayor if Hidroituango was delayed yet again? What premium did EPM have to pay for a loan where the lender does not seem to care if the project finishes or not? Or if hundreds of thousands of people downstream are displaced if the dam is not stabilized?

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