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Colombia Is Said to Review Plans to Divest Its Stake in ISA

Oscar Medina and Ezra Fieser
·3 min read

(Bloomberg) -- Colombia’s government is reviewing plans to sell a stake in Interconexion Electrica SA that is attracting interest from publicly owned companies, according to people with direct knowledge of the matter.

Grupo Energia Bogota is among companies considering a bid for the stake in the transmission company, while Ecopetrol SA and Empresas Publicas de Medellin could also look at the asset, one of the people said, asking not to be named discussing private matters. The government owns a majority 51.4% stake in ISA, which at current market prices could fetch $4.2 billion.

President Ivan Duque’s administration has identified divestments as a potential source of income to narrow the fiscal deficit to 7.6% of gross domestic product this year and try to stave off the risk of having its credit rating cut to junk. The deficit widened to an estimated 8.9% in 2020 after the government was forced to boost spending to cope with the pandemic.

ISA shares hit a record high in Bogota trading Wednesday, gaining as much as 3.6%, according to data compiled by Bloomberg.

“From time to time, news mentioning that the government wants to divest ISA reminds investors that in case that possibility materializes it would involve a chunky premium,” said Daniel Guardiola, an analyst at BTG Pactual in Bogota.

The sale would likely fetch a premium since it involves potential control of the company and based on previous sales of energy transmission companies in the Andean region, he said.

While Finance Minister Alberto Carrasquilla has said the government won’t privatize what he has called “strategic” assets, a sale between public companies may help meet both those criteria. The sale would send a message to ratings companies that the government is committed to meeting its fiscal targets, the person said.

ISA, Empresas Publicas de Medellin and Grupo Energia Bogota declined to comment. The Finance Ministry and Ecopetrol didn’t reply to requests for comment.

While Ecopetrol is owned by the national government, Grupo Energia and Empresas Publicas de Medellin are controlled by regional authorities.

A bidding process could be launched in the coming months, the person said, though previous attempts to sell the asset in 2019 were called off. This time however, the government needs the revenue to finance its 2021 budget.

Empresas Publicas de Medellin currently owns 8.8% of ISA and Grupo Energia Bogota sold a 1.7% stake in the firm in 2017. Ecopetrol, the state-run energy producer, is advancing in renewable plans with solar energy projects.

ISA, which operates energy transmission lines and highways in Latin America, has a market value of 29.4 trillion pesos ($8.6 billion), according to data compiled by Bloomberg. ISA shares have rallied 31% in the past year on Colombia’s Colcap index, while the local stock market overall fell 14%.

(Updates with share price and analyst comment starting in 4th paragraph.)

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