Colombia's De la Espriella win puts Ecopetrol governance shake-up on hold

Colombia’s presidential election result has halted plans for governance changes at state-owned Ecopetrol and increased the likelihood of a review of the state-controlled energy group under incoming president Abelardo de la Espriella.

Proposals that had been discussed in recent weeks, including a potential extraordinary shareholders’ meeting and changes to the composition of Ecopetrol’s board, have lost momentum following De la Espriella’s projected victory over government-backed candidate Iván Cepeda, El Tiempo reported.

According to the newspaper, discussions included the possible removal of a board seat representing minority shareholders through pension funds and modifications to rules governing employee representation on the board. An extraordinary shareholders’ meeting had initially been considered for around June 17, with additional appointments expected after the presidential run-off.

The election outcome has also intensified scrutiny of Ecopetrol chief executive Ricardo Roa, who faces criminal charges linked to alleged influence peddling and breaches of campaign finance limits. Several board members had previously voiced opposition to his continued leadership, according to the report.

People close to De la Espriella’s campaign told El Tiempo that replacing Roa and commissioning an audit of Ecopetrol’s operations could become priorities for the incoming administration. Potential changes at power transmission subsidiary ISA and broader reviews of governance practices across the Ecopetrol group are also being considered, the newspaper said.

Any attempt to alter board representation could face resistance from minority investors because of governance commitments established during previous administrations.

Attention has been focused on a board meeting scheduled for June 24, where directors were to revisit the possibility of an extraordinary shareholders’ meeting and discuss concerns raised by vice-president-elect José Manuel Restrepo regarding oversight of issues currently under review by Colombian and US authorities.

Meanwhile after the presidential election results were first announced, Ecopetrol surged in US premarket trading, with investors betting on a more favourable environment for the oil and gas sector, Portafolio reported.

The state-controlled producer's shares rose 9.65% in preliminary trading to $16.58 ahead of the June 23 market open. The rally followed De la Espriella's pledges to revive oil and gas contracting, authorise hydraulic fracturing projects and overhaul Ecopetrol's corporate governance structure.

Investors appeared to react positively to expectations of a shift away from the energy policies pursued under incumbent president Gustavo Petro, whose administration curtailed new hydrocarbon exploration contracts and promoted a faster transition away from fossil fuels.

Vice president-elect José Manuel Restrepo said the company had suffered from weak management and said operational and financial indicators had deteriorated during recent years.

The positive market reaction extended beyond Ecopetrol. Shares of Grupo Aval gained 7.83% in premarket trading to $6.20, while Grupo Cibest advanced 6.70% to $86.91.

The moves suggest investors expect the incoming administration to pursue policies aimed at boosting Colombia's hydrocarbons sector, which remains one of the country's main sources of export revenue despite mounting pressure to diversify the economy.