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Ecopetrol head comments on ISA bid

Ecopetrol has offered to buy 51.4% of ISA
Ecopetrol has offered to buy 51.4% of ISA

The head of Colombia’s national oil company (NOC) Ecopetrol has defended his company’s decision to submit a bid for a 51.4% stake in Interconexion Electrica SA (ISA), the country’s electricity transmission system operator (TSO).

According to CEO Felipe Bayon, the TSO will be a good investment, even though its operations – electricity transmission, the operation of toll roads and fibre optics – fall outside the scope of the NOC’s core business. But if Ecopetrol is able to gain a foothold in these areas, it will be “years ahead” with respect to diversifying its portfolio, he told Bloomberg in an interview last week.

Bayon acknowledged that it was uncommon for oil companies to take this approach. However, he also indicated that he stood behind the decision to take control of ISA, saying it would help the NOC reduce its carbon emissions and meet environmental, social and governance (ESG) goals. “The fact that no other oil and gas company has done it doesn’t mean it’s a bad idea,” he remarked.

Acquiring the TSO will allow Ecopetrol to forge a new path forward as oil and gas fall out of favour, he added. “All the oil and gas companies are going into renewables, and everyone is moving into power generation. That doesn’t mean that that’s the only route to energy transition,” he said.

Additionally, the CEO also denied speculation that Ecopetrol is under pressure from Bogota to complete the transaction in order to secure extra revenues. “If somebody tells me, ‘You are doing this because the government is asking me to do it,’ the answer is no,” he declared. “I'm doing this because I'm convinced this is a good business.”

He went on to say that Ecopetrol was ready to walk away from negotiations for a majority stake in ISA if necessary. The NOC decided to make a bid after studying the TSO for about a year and a half, but it will drop the plan if it concludes that ISA is not a good investment, he commented.

Protection from risk

Bayon was speaking shortly before Armando Zamora, the head of Colombia’s national oil regulator ANH, expressed support for the company’s plans. Speaking at IHS Markit’s CERAWeek conference, Zamora said that the acquisition of ISA might help shield Ecopetrol from fluctuations on world crude markets. “It makes a lot of sense to engage in a transition by balancing a business which is related to energy but provides more stability in the income,” he said.

The ANH chief also acknowledged that the Colombian government hoped to put the proceeds of the transaction to good use. “It has to do also with the government balancing the books, given the very difficult fiscal conditions [in which] we are living,” he was quoted as saying by Reuters.

ISA and Ecopetrol are currently engaged in non-binding negotiations on the proposed sale. Government officials hope the parties will be able to conclude a deal before the end of this year. Bogotá is looking to execute the transaction as a direct contract, rather than calling a public tender for the stake, since Ecopetrol and ISA are both controlled by the state.