Relationship with the Municipality of Medellín


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.

EPM’s corporate purpose is sustainability, understood as a balance among economic, social and environmental conditions within the context in which it operates, generating value for its stakeholders including its owner, and recognizing that its Corporate Governance model is one of the fundamental pillars for achieving it. The EPM Governance Model is based on three principles: balance among the agents mentioned, accountability, and control.

Balance is achieved through the definition of clear rules in the company’s governance structures, which guarantees the generation of value for its owner and is represented by formal elements such as:


Accountability is achieved through means of ethics and values (intangible elements) embedded in the organizational culture, the timely and full disclosure of information available to stakeholders and the market in general, mechanisms for the participation of citizens, and the disclosure of conflicts of interest.

And finally, control is achieved through the implementation of self-regulation mechanisms and the adoption of an environment fostering internal and external controls that are independent, objective and impartial.

The integration of good corporate governance practices with a robust Corporate Social Responsibility policy is one of the ways to solidify sustainability as a corporate purpose for EPM. An appropriate CSR policy simultaneously promotes the generation of value for the owner and for society, including other stakeholders, by respecting the governance and regulatory framework defined by the State and subject to its corporate purpose.

This is why EPM’s concept of CSR is understood as an essential part of its management model and is compatible with its practices and model of corporate governance. The purpose of the company is to contribute to sustainable human development, simultaneously allowing generation of value for its owner, the Municipality of Medellín, for the company, and for society. It is the understanding that the generation of value goes beyond the strictly financial. What is profitable is not necessarily sustainable, but what is sustainable must, out of necessity, be profitable.

Annual report on corporate governance

EPM’s annual report on corporate governance has been designed following the “Comply or Explain” system. This is a disclosure mechanism to different stakeholders on the effective compliance with practices adopted in relation to corporate governance and to indicate the reasons in the event of any noncompliance.

Country code survey

In order to comply with the provisions of Colombia’s Financial Superintendence, EPM, in its capacity as issuer of corporate debt securities, provides its stakeholders with the “Country Code” survey of corporate practices, which correspond to 2009 and 2010.

The Medellín Council determined that the percentage of EPM’s financial surplus that could be transferred to the Municipality through ordinary means would be equivalent to 30% thereof. The Framework Agreement on Governance established that additional, extraordinary transfers could be made, taking into consideration the financial requirements of the Municipality for specific investment programs and EPM’s financial needs for its own management, so that this would not put business viability or its expansion projects at risk. The additional transfers must, in all cases, be authorized through agreement with the Municipal Council, with the prior approval of the Mayor for the social investment for which the transfers are intended, and with prior consultation with the company on the impact on its investment plan and credit risk rating.

In 2011, there were transfers of ordinary surplus equivalent to $437 billion pesos, corresponding to 30% of profits for the year 2009. In addition, there were extraordinary contributions totaling $360 billion pesos.


 2008 

 2009  

 2010  

 2011  

 % 

Ordinary transfers 

 333.327 

399.519

509.343 

 437.346

 55%

Extraordinary transfers 

 187.500 

 187.500

 337.500

 360.154

 45%

Total transfer

 520.827

587.019 

846.843 

 797.500

100% 

 Transfer variation

 13%

 44%

   -6%