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Juan Esteban Calle Restrepo

COLOMBIA - Energy & Mining

The Local Touch

CEO, Empresas Públicas de Medellí­n (EPM)

Bio

Juan Esteban Calle Restrepo studied Business Administration and obtained an MBA from the University of Chicago. He has worked as an Investment Advisor for the Bank of Montreal, the Director of Foreign Investment at the Proexport Trade Office in Canada, and as an independent consultant. He was also Secretary of Finance in the government of Antioqula in Medellí­n, Colombia. He is currently CEO of Empresas Públicas de Medellí­n.

"Colombia is full of opportunities, especially in hydroelectric projects."

How has Empresas Públicas de Medellí­n (EPM) evolved since its establishment in 1955?

It evolved from a small company in 1955 with 50 MW of installed generation capacity to a large corporation with 3,600 MW. We grew from just a few thousand clients in 1955 to more than 6 million today. In 2013, the company expects to transfer more than $500 million in dividends to the Municipality of Medellí­n. Compare that to 1970, when the transfer of dividends was less than $5 million. This illustrates the company’s impressive growth in its 55 years of history.

What have been the company’s milestones since you were appointed president on January 1, 2012?

Most important was the successful awarding of EPM’s largest contract in history. It was a $1 billion contract for the construction of the civil works of the Hidroituango project, which will be the largest hydro facility in the history of Colombia. With 2,400 MW, it is equivalent to the installed capacity that EPM developed in the first 45 years of its history.

“Colombia is full of opportunities, especially in hydroelectric projects.”

How will the Hidroituango project impact the local energy sector and when will it be completed?

We will start operations of the first four units in 2018 (1,200 MW). The remaining four units (1,200 MW) will start operations in 2022. Hidroituango will generate close to 17% of the total electricity available in Colombia.

What is your outlook for Colombia’s energy sector, and what is the potential for investment in this sector?

Colombia is full of opportunities, especially in hydroelectric projects. We are bullish regarding the future interconnection of Colombia with Panama and Central America. It is taking longer than expected, but we are confident that in the future the interconnection will become a reality.

What about the potential for renewable energy?

We are starting with wind farms, and EPM has a small 19-MW pilot project in La Guajira. We are interested in expanding EPM’s involvement in renewables. We are looking for more wind farm opportunities in other Latin American countries where the regulatory framework is attractive for renewables. We have also been planning pilot projects with solar panels in rural areas of Colombia, where it is becoming economically inefficient to continue deploying the distribution infrastructure. Solar panels may become the best alternative sources of power for those in remote or rural areas.

Does the government offer incentives for renewables?

Not yet, but hopefully in the future it will increase the promotion of renewables. We are carrying out a variety of hydro projects in Colombia, making use of clean technology.

What are your plans for Mexico, Chile, Brazil, and Peru? When will you enter the Mexican market?

We are close to announcing our entrance into the Mexican market. Our goal is to enter before the end of 2012. Mexico is full of opportunities, and we have a goal to become a relevant multinational company in the near future. For this to happen, we have to be in Mexico, Chile, Brazil, and Peru. We can’t talk about the specifics of the plan until the deals are closed, but we do plan to enter Mexico and Chile soon.

EPM controls 25% of the energy business in terms of distribution and generation. How would you assess the level of regulation in the sector?

I think the regulations are appropriate. There is a solid framework for investment, with strong institutions in the energy sector in Colombia, and we feel that the rights of investors are well protected. However, the regulators do not allow us to increase our 25% share, and we are pushing for that limit to be changed because we feel that it is inappropriate. Growing organically, we still have the room to purchase a small distribution company in Colombia.

What are your prospects for the gas sector and EPM’s plan to have 10 gas stations in the country by the end of 2012?

I strongly believe in the gas sector as part of the company’s commitment to environmental responsibility. We want to be the leaders of environmental responsibility in Colombia. We have a plan to strengthen natural gas as an alternative for sustainable transportation. We believe that natural gas is the best, cleanest fuel available. EPM has an advantage in Medellí­n, which is the only city in Colombia where the mass transportation articulated bus system is fueled by natural gas. This is a good start. At EPM we have a large fleet of vehicles that we plan to convert to natural gas as well. At the moment, about 40% of our fleet runs on natural gas, so we plan to lead by example. Medellí­n will be a precursor for natural gas, and I’m sure that we will be leaders in that regard. Our proprietary network of gas stations will help many corporate clients and people to feel comfortable converting their vehicles.

How has EPM contributed to developing the economic and social wellbeing of the region?

We consider ourselves leaders in the region regarding economic, social, and environmental responsibility. We are not only generating employment in the region, but we are also developing major infrastructure projects that have a direct impact on the competitiveness of Colombia. EPM’s total investment in Ituango will exceed $6 billion, creating close to 27,000 direct and indirect jobs. We are not only leaders in hydro generation, which is highly competitive, but also in energy distribution, water distribution, and waste water treatment as well. We cover Colombia from coast to coast—from our border with Venezuela to the Pacific coast—providing essential services that are making Colombia a more competitive country. Millions of Colombians and Central Americans have a better quality of life thanks to the services we are providing every day.

You have a budget for the investment of $1 billion in acquisitions per year. What are your short-term projects?

We are already in Guatemala, Panama, and El Salvador, but we would like to increase our presence in Central America. We are participating in the distribution business with the goal to add generation assets in those countries. We are looking for opportunities in distribution and generation, as well as opportunities in the water business. We have the largest electricity distribution company in Guatemala with more than 1 million clients. EPM also holds that title in Panama with about 360,000 clients. In El Salvador, we are the second largest provider, with close to 330,000 clients.

EPM has suffered losses from not being able to distribute all of the energy it generates because of terrorist attacks. Can you asses the security landscape?

We are confident in the peace process led by President Santos. However, Colombia’s transmission infrastructure network has faced isolated terrorist attacks in the past. When those sporadic attacks have arisen, we have lost revenues associated with restrictions to export electricity from Antioquia to the Atlantic coast of Colombia. We feel that the government and the army are fully committed to protecting the electric infrastructure of Colombia and they are putting their lives on the line for this. We are bullish and believe the current process will improve the situation.

What is your outlook on the energy sector in Colombia and the future of EPM?

We are seeing a myriad of opportunities. There is huge hydro potential that still needs to be fully developed. The mining, oil, and gas sectors have huge potential and will be responsible for a large part of the growth in electricity demand in Colombia. We will also benefit from upcoming integration strategies with Panama and Central America. More importantly, in 10 years, there is a high probability that Colombia will finally be living in peace. Once the security problems are resolved, it will be easier to deploy the infrastructure that Colombia needs to continue growing and attracting more international investors.

© The Business Year – November 2012

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