Relationship with the Municipality of Medellín
The regulatory framework governing domestic public utilities in Colombia obliges Municipalities to ensure that they provide their inhabitants, in an efficient manner, with domestic services for water, sewerage, sanitation and electricity. They can fulfill this obligation through official public utility companies, whether private or mixed, or directly through the central administration of the respective municipality.
This implies that in the case of EPM – as it is the company that provides domestic public utilities to the population of the Municipality of Medellín – in addition to the ownership relationship between the Municipality and the company, a business relationship also exists, as it is EPM’s principal client. This interrelationship between both entities combines with the territorial and regulatory competence enjoyed by the Municipality.
From the Corporate Governance perspective, the relationship between the Municipality of Medellín and EPM is sui generis, given the triple status of the Municipality: (i) as a territorial entity, (ii) as a sole owner, and (iii) as EPM’s client.
The information contained within this section makes reference to the Municipality of Medellín’s status as EPM’s owner, regarding its relationship as a territorial entity and client; the corresponding information may be consulted in the section Relationship with the State.
EPM is an autonomous company that has operated independently of the Municipality since its creation in 1955. Its participation in the Company is governed by the regulations provided in Article 27, Law 142 of 1994, as the Municipality’s status is that of sole owner of the industrial and commercial State company under municipal control.
Traditionally, EPM and the Municipality of Medellín have tended to separate roles in which the activities of both entities overlap and which are mainly summarized as follows:
- The Municipality as the owner.
- The Municipality as the territorial entity.
- The Municipality as EPM’s client.
This independence results in a more efficient management and greater transparency in the actions of each entity, for which purpose different communication channels have been formalized with the Municipality for each of the roles performed. These are as follows:
- Ownership role: this is exercised through its participation as President of the Board of Directors and is governed by the Framework Agreement on Relationships, a document that establishes the principles that define the actions of both entities and the obligations of each in regard to growth and sustainability of EPM.
- Territorial entity role: with respect to taxation (property, industrial and commercial, etc.) that must be paid to the Municipality, EPM is treated for tax purposes in a similar way to any other individual or legal entity and there are no differentiating or special agreements with the Municipality in this regard.
- Client role: EPM does not grant special treatment to the Municipality of Medellín, nor does it exempt it from payment, in its capacity as a user of public utilities.
For EPM, Corporate Governance is the set of provisions, practices and measures that outline the appropriate balance between ownership and management of the company, with the aim of guaranteeing sustainability and growth, the rights of its investors, transparency and ethics in its actions and balanced access to information for its stakeholders.
For the purpose of implementing these proposals, EPM has a series of documents that compile the standard requirements that are applicable, both for decentralized companies in the domestic public utilities sector and for those that issue securities. It combines them with a series of specific practices and standards for self-regulation that are indispensable in order to generate confidence among its stakeholders, maintain growth, and promote transparency.