EPM: When Deforestation Destabilised a Dam, Colombia's Largest Utility Paid the Price

Empresas Publicas de Medellin (EPM)

EnergySouth AmericaDeforestationSoil Degradation

In 2018, Empresas Publicas de Medellin (EPM) faced total losses exceeding $2.5 billion after landslides triggered by slope destabilisation caused a near-catastrophic failure of its flagship HidroItuango hydroelectric dam.1 The 2,456-megawatt project -- Colombia's largest-ever infrastructure undertaking, with an original budget of $3.5 billion -- was months from completion when a series of landslides blocked the dam's sole operational water diversion tunnel, triggering uncontrolled reservoir filling, flooding of the underground powerhouse, and the forced evacuation of tens of thousands of downstream residents.23 EPM ultimately collected a $983.8 million insurance settlement, but the total financial damage -- including cost overruns exceeding $1 billion, court judgments, and ongoing remediation -- dwarfed that recovery.45 The episode exposed a risk that had been visible for years but never priced: the dam's structural viability depended on the stability of canyon slopes that EPM's own construction activities had destabilised.

EPM's HidroItuango project -- a 225-metre-high dam on the Cauca River designed to supply 17% of Colombia's electricity -- depended on the physical stability of steep canyon slopes in one of the most geologically active corridors in the Andes.26 The dam sits in a canyon spanning two young mountain ranges, the Central and Western Cordilleras, an area with more than seven active geological faults in the construction zone.7 The canyon's bedrock is composed largely of saprolite -- chemically weathered tropical rock that, as geologists have noted, becomes "a kind of putty, because of the humidity."8 In their natural state, these inherently unstable slopes were reinforced by the root systems of dry tropical forest, a globally endangered ecosystem of which only 8% of its original Colombian distribution remains.37 The dam's construction and operation required this slope stability for three critical functions: maintaining open diversion tunnels during the construction phase, protecting the dam structure and powerhouse from mass wasting, and enabling safe reservoir impoundment.

EPM's construction activities systematically removed the natural slope reinforcement that the project's own viability required: the company cleared approximately 4,500 hectares of dry tropical forest whose root systems had stabilised the canyon's inherently fragile slopes.39 This clearing exposed saprolite to direct rainfall and erosion, eliminating the biological matrix that had held the weathered rock in place. EPM also failed to remove the cut vegetation before beginning to flood the reservoir area, allowing organic debris to accumulate and compound the blockage risk in the diversion system.9 Furthermore, EPM illegally approved a third water diversion tunnel in 2015 without obtaining the required environmental licence, bypassing the regulatory safeguards designed to assess precisely these kinds of geological and ecological risks.10 The environmental licensing authority ANLA later opened sanctions proceedings against EPM for failing to protect the ecological basin.10 The feedback loop was direct: the construction methods used to build the dam degraded the slope stability that the dam needed to function, and the regulatory shortcuts that accelerated construction removed the checks that might have caught the problem.

Between 28 April and 7 May 2018, a sequence of three landslides and collapse events blocked the sole operational diversion tunnel at the dam site.2 The other two diversion tunnels had already been sealed with concrete as part of the planned construction sequence, leaving the project with no redundancy when the remaining tunnel was obstructed.1 At least one of the landslides occurred on a slope above an area that had been previously excavated for construction, suggesting that construction disturbance and vegetation removal had contributed to slope failure.11 The blockage halted the controlled flow of the Cauca River through the dam site, and water began to rise behind the incomplete dam structure in an uncontrolled impoundment -- precisely the scenario that slope instability made inevitable once the forest cover was removed.

EPM dynamited the sealed backup tunnels on 10 May to relieve pressure on the rising reservoir, but the floodwaters had already caused irreparable damage to electromechanical equipment and the structure of the powerhouse cavern itself.112 When the main tunnel naturally unblocked on 12 May, the sudden release of massive water volumes caused catastrophic downstream flooding, destroying homes, bridges, hospitals, and schools along the Cauca River.3 Between 25,000 and 113,000 people were evacuated, depending on the source, and a regional state of emergency was declared.35 A subsequent assessment by the U.S. Army Corps of Engineers identified an active landslide above the dam measuring 130,000 cubic metres, with a potential volume of 10 to 40 million cubic metres -- a mass that, if mobilised, could have caused a far greater catastrophe.8 The dam, which had been built to generate clean energy, had instead become a source of ongoing geological and hydrological risk.

The financial toll accumulated across multiple categories and continued to grow years after the initial emergency. EPM's insurer, Mapfre Seguros Generales de Colombia, agreed to a $983.8 million settlement -- $350 million paid between 2019 and 2021, with a further $633 million disbursed in January 2022.413 Colombia's president stated that the insurance funds would "guarantee that the project can be finished" and "safeguard the fiscal health of EPM and the city of Medellin" -- an acknowledgement that the municipal utility's solvency was at stake.13 Cost overruns exceeded $1 billion above the original 11 trillion peso ($3.5 billion) budget, according to geologist Oswaldo Ordonez.5 The Colombian State Council ordered EPM to pay 781 billion pesos (approximately $195 million) in a landmark ruling.14 Total disaster costs to the public reached approximately $1.5 billion, though EPM and government officials acknowledged that "social and environmental damages remain incalculable."10

The project's total investment ballooned to approximately 18.3 trillion pesos ($4.69 billion), up from an original budget of $3.5 billion, and the completion date -- originally set for December 2018 -- was delayed by years.513 The insurance settlement, while substantial, covered only a fraction of total losses: total estimated losses exceeded $2.5 billion, of which insurance and reinsurance payouts accounted for approximately $1 billion.1 The gap between insured and total losses -- more than $1.5 billion -- fell on EPM, its public-sector owner (the Municipality of Medellin), and Colombian taxpayers. For a utility whose financial health is directly tied to a city's fiscal position, the uninsured losses represented a form of systemic risk that extended well beyond EPM's own balance sheet.

Community organisations had identified the risk before the disaster struck. Movimiento Rios Vivos, a local environmental movement, reported in 2016 that EPM's forest clearing "raised the risk of landslides, migration of species, and the loss of nationally protected plant species."3 The warning was specific, documented, and ignored. Geotechnical conditions at the site were also inadequately characterised: post-crisis analysis revealed that pre-construction geological assessment had been incomplete, with the degree of saprolite weathering and fault activity insufficiently mapped.8 The combination of ecological destruction and inadequate geological due diligence created a compound risk that neither EPM's engineers nor its insurers had fully priced. The reinsurance industry later cited HidroItuango as a case study in the challenges of underwriting large infrastructure in tropical mountain environments, noting the region's inherent exposure to "earthquakes, flooding, landslides and storms."1

The crisis did not end with the 2018 emergency. In February 2019, EPM closed the dam's floodgates and reduced the Cauca River's flow from a normal dry-season volume of 450-500 cubic metres per second to just 35 -- approximately 10% of normal levels.9 The abrupt reduction triggered a mass fish die-off along downstream stretches of the river, with local brigades rescuing five out of every six fish from affected areas.15 Environmental leader Isabel Zuleta of Movimiento Rios Vivos called the event "the greatest environmental crime that has ever happened in Colombia."9 The downstream ecological damage compounded EPM's legal and reputational exposure, demonstrating that the project's impacts extended far beyond the construction zone. Indigenous and community-led reforestation efforts subsequently aimed to "recover ecological processes that have been lost," an implicit acknowledgement that the ecosystem services destroyed during construction would need to be actively rebuilt.7

HidroItuango demonstrates a pattern visible across large infrastructure projects in ecologically sensitive terrain: the construction activities needed to build the asset degraded the natural systems that the asset's structural integrity depended on, converting a free ecosystem service into a multi-billion-dollar liability. The dry tropical forest on the Cauca River canyon's slopes performed a quantifiable engineering function -- slope reinforcement on geologically unstable terrain -- that EPM replaced with nothing. When heavy rainfall tested those unprotected slopes, the result was predictable and predicted. The $2.5 billion in total losses, the years of delay, and the ongoing geological risk at the dam site are the financial expression of a dependency that was never managed: EPM's project needed stable slopes, its construction destroyed the forests that provided them, and the bill came due in the form of landslides, a flooded powerhouse, and a dam that may never operate as designed.

Footnotes

  1. Global Reinsurance, "Lessons from the Ituango Dam," accessed 2026. https://www.globalreinsurance.com/home/lessons-from-the-ituango-dam/1441413.article ↩ ↩2 ↩3 ↩4 ↩5

  2. AGU Landslide Blog, "Hidroituango: another landslide crisis at a hydroelectric dam," 21 May 2018. https://blogs.agu.org/landslideblog/2018/05/21/hidroituango-1/ ↩ ↩2 ↩3

  3. Frontline Defenders, "The Hidroituango Dam and the Struggle of Movimiento Rios Vivos," accessed 2026. https://www.frontlinedefenders.org/en/campaign/hidroituango-dam-and-struggle-movimiento-rios-vivos-protect-its-territory-water-and-life ↩ ↩2 ↩3 ↩4 ↩5 ↩6

  4. Finance Colombia, "EPM Received Nearly $1 Billion USD in Insurance Settlement After Damage to Hidroituango Mega-Dam," accessed 2026. https://www.financecolombia.com/epm-received-nearly-1-billion-usd-in-insurance-settlement-after-damage-to-hidroituango-mega-dam/ ↩ ↩2

  5. Renewable Energy World, "Cost overruns on 2.4-GW Ituango hydro project in Colombia could exceed US$1 billion," accessed 2026. https://www.renewableenergyworld.com/energy-business/new-project-development/cost-overruns-on-2-4-gw-ituango-hydro-project-in-colombia-could-exceed-us-1-billion/ ↩ ↩2 ↩3 ↩4

  6. AGU Landslide Blog, "Hidroituango: another landslide crisis at a hydroelectric dam," 21 May 2018. https://blogs.agu.org/landslideblog/2018/05/21/hidroituango-1/ ↩

  7. OpenEdition / Ideas, "Hidroituango," accessed 2026. https://journals.openedition.org/ideas/10005?lang=en ↩ ↩2 ↩3

  8. SANDRP, "Risks of collapse of Hidroituango Dam hangs over Columbia," 12 June 2018. https://sandrp.in/2018/06/12/risks-of-collapse-of-hidroituango-dam-hangs-over-columbia/ ↩ ↩2 ↩3

  9. Mongabay, "Colombia's disaster-ridden hydropower project runs second-largest river dry," February 2019. https://news.mongabay.com/2019/02/colombias-disaster-ridden-hydropower-project-runs-second-largest-river-dry/ ↩ ↩2 ↩3 ↩4

  10. AboveGround, "EPM's Disastrous Dam," accessed 2026. https://aboveground.ngo/epms-disastrous-dam/ ↩ ↩2 ↩3

  11. AGU Landslide Blog, "Ituango Dam Site 4," 28 May 2018. https://blogs.agu.org/landslideblog/2018/05/28/ituango-dam-site-4/ ↩

  12. Global Reinsurance, "Lessons from the Ituango Dam," accessed 2026. https://www.globalreinsurance.com/home/lessons-from-the-ituango-dam/1441413.article ↩

  13. Insurance Journal, "Mapfre to pay $983.8 million to EPM," December 2021. https://www.insurancejournal.com/news/international/2021/12/13/645360.htm ↩ ↩2 ↩3

  14. Colombia Reports, "EPM's Hidroituango debacle cost Colombia $1.2 billion (and counting)," accessed 2026. https://colombiareports.com/epms-hidroituango-debacle-cost-colombia-1-2-billion-and-counting/ ↩

  15. The Bogota Post, "Crisis Hidroituango: troubled dam continues to wreak havoc on Cauca River," accessed 2026. https://thebogotapost.com/crisis-hidroituango-troubled-dam-continues-to-wreak-havoc-on-cauca-river/36420/ ↩