Fitch downgrades EPM

Fitch Ratings said it downgraded Empresas Publicas de Medellin ESP's foreign- and local-currency issuer default ratings to BBB- from BBB and maintained the rating watch negative.

“The downgrade is due to increased intervention by EPM's owner, the city of Medellin (BBB-/Negative), in the management of the company, which represents a deterioration of corporate governance controls at the company. Fitch believes recent actions taken by the company are contrary to the governability agreement, signed on April 23, 2007, between the City of Medellin and EPM's management, in which the municipality agreed to respect the autonomy of EPM as an industrial and commercial enterprise of the state and to act exclusively through the board of directors,” Fitch said in a press release.

All eight independent members of EPM's board announced their resignations after the recently-elected mayor of Medellin told the company to take certain actions without board approval, the agency said.

“The resignations of eight of the nine board of director members follow an announcement in July 2020 that EPM's social objective may be expanded beyond providing public services to include tourist services, new technologies, infrastructure and bridges and tunnels, among other items,” Fitch said.

Also, without consulting the board, EPM filed a lawsuit this week for COP 9.9 trillion against the contractors, supervisors and the contractors' insurance companies of its 2.4 gigawatt Ituango project.

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