Ecopetrol secures extension of exclusivity agreement for ISA stake acquisition

Ecopetrol, Colombia’s national oil company (NOC), revealed last week that the government had agreed to extend the period during which it has the exclusive right to negotiate for a 51.4% equity stake in Interconexion Electrica SA (ISA), the country’s electricity transmission system operator (TSO).

In a statement dated June 24, Ecopetrol reported that the end date of its exclusivity agreement with the Ministry of Finance and Public Credit (MHCP) had been pushed back to August 31. The agreement had originally been due to expire on June 30.

The NOC’s request for the extension is related to its decision not to pay for the majority stake in ISA via one of the options it had previously considered – namely, an offering of 8.5% of its own shares. According to the statement, Ecopetrol has informed MHCP that it is now looking to finance the transaction with a bank loan. If so, the Colombian government’s stake in the NOC would remain at 88.5%.

Ecopetrol pointed out that its finances had improved since it announced its intention of buying the ISA stake earlier this year. “This decision relies on the favourable evolution of the financial situation of Ecopetrol Group, which provides the flexibility to achieve the closing of the ISA transaction through a credit facility with international banks, and aligned with the leverage parameters established in the company’s business plan,” the NOC said.

“The disbursement of such credit facility would be subject to the closing of the ISA transaction,” it added.

Ecopetrol also stressed, though, that it was still examining its options for covering the cost of diversifying its asset portfolio ahead of the transition away from fossil fuels. “[The] company will continue working on structural financing initiatives for the energy transition strategy, such as an equity issuance and/or the execution of medium and long-term debt transactions under favourable market conditions,” it said.

ISA is involved in electricity transmission, the operation of toll roads and fibre optics. These operations 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” of other companies with respect to diversifying its portfolio, the company’s CEO Felipe Bayon said earlier this year.