Fitch Rtgs: EPM's Management Nominations May Reinforce Linkage with City

(The following statement was released by the rating agency)

Fitch Ratings-New York-05 February 2021: Fitch Ratings will continue to closely monitor the city of Medellin's (BBB-/Negative) appointment of a new permanent CEO and other senior management positions at Empresas Publicas de Medellin (EPM; BBB-/Rating Watch Negative). These nominations will shape Fitch's view of EPM's independence and our view of the rating linkage between the company and the city of Medellin. Until recently, Fitch had taken a standalone rating approach when rating EPM given the company's strong track record of autonomy, management with technical expertise and independent regulators. Our expectation for rating EPM, as well other government related utilities in Colombia, with an emphasis on their standalone credit profiles (SCP) rather than on their linkage with the government or municipality, is that their owners will maintain this independence by nominating an independent board of directors and management teams technically competent for their relevant positions. The variables are key to ensuring that the company has a strategic vision and executes economically sound projects. EPM's board of directors, following its corporate governance bylaws, appointed engineer Monica Ruiz Arbelaez, who was previously the planning and strategy vice president with 26 years of experience at EPM, as interim CEO. The City of Medellin's mayor's office will select a permanent replacement under the supervision of the board of directors. Alejandro Calderon Chatet, the new financial vice president, is an economist and business administration specialist. EPM's ratings reflect the company's low business risk resulting from its diversification and characteristics as a utility service provider. The ratings also reflect EPM's strong linkage with its owner, the City of Medellin. EPM is a leading electricity generator in Colombia and exhibits a diversified portfolio of utility businesses that include electric generation, transmission and distribution, water and sewage services, natural gas distribution, and garbage collection and disposal services. EPM's Rating Watch Negative reflects continued uncertainty regarding the closure of Ituango's blocked Auxiliary Diversion System since 2018, and the project's final cost over-runs. Fitch expects that 300MW of the project will be online by early 2022. The resolution of the Negative Watch may take longer than six months, given these uncertainties. Contact: Lincoln Webber Associate Director +1-646-582-3523 Fitch Ratings, Inc. 300 W 57th Street New York, NY 10019 Jose Luis Rivas Director +57 1 484-6770

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