Update: Ecopetrol Completes US$3.67 Billion Buyout of ISA Shares; Profits Also Improve
Colombia President Ivan Duque announced August 20 that Colombia’s mostly stated-owned Ecopetrol oil company has just paid US$3.67 billion to finalize the acquisition of 51.4% of the shares of Medellin-based multinational electric-power transmission giant, ISA.
That 51.4% block of ISA stock had been held by Colombia’s Finance Ministry. Hence Ecopetrol’s buyout deal helps Colombia’s national government recoup part of the massive debt it incurred in order to subsidize mainly poor and working-class populations suffering from the Covid-19 pandemic over the past 18 months and beyond.
The US$3.67 billion buyout follows a US$4 billion credit agreement between Ecopetrol and four multinational banks: Banco Santander S.A., Citibank N.A., JPMorgan Chase Bank N.A. and The Bank of Nova Scotia, each with a 25% interest in the loan deal, according to Ecopetrol.
“The main financing conditions are: (i) 100% capital payment upon maturity within a period of two years from the contract signing date; (ii) an interest rate of Libor USD (3M) + 80 basis points and (iii) an initial aggregate commission of 30 basis points,” according to Ecopetrol.
“With the [loan] authorization resolution obtained from the Ministry of Finance, the company has complied with all the procedures and internal and external approvals required for the execution of the credit agreement. The conditions obtained confirm the confidence of the financial sector in the financial soundness of the Ecopetrol Group and its future prospects with this acquisition,” Ecopetrol added.
Reacting to the buyout deal, ISA on August 13 issued this statement:
“At a press conference chaired by the Ministers of Finance, Mines and Energy and the Ecopetrol’s CEO, it was emphasized that the [proposed share buyout] strengthens the capabilities of both companies in view of the future challenges of energy transition and sustainability, opening the possibility of achieving synergies, enhancing innovation and the adoption of new technologies. It was also highlighted the importance that the two companies will continue to belong to the Colombian people.
“During the conference, Ecopetrol emphasized that ‘ISA will continue to be ISA’ and reiterated that ISA’s strategy will be respected . . .
“In addition, ISA, as a company that belongs to all Colombians, is committed to the energy future of the country and the leadership of Colombia in Latin America . . .
“Once the Ministry of Finance notifies ISA of the closing of the transaction, it will be made public in a timely manner,” ISA added.
ISA 2Q 2021 Profits Rise
On a related front, ISA announced August 13 that its second quarter (2Q) 2021 net income rose 6.4% year-on-year, to COP$586 billion (US$152 million).
Operating revenues rose 6% year-on-year, to COP$2.8 trillion (US$729 million), while earnings before interest, taxes, depreciation and amortization (EBITDA) rose 3.2%, to COP$1.9 trillion (US$494 million).
Assets rose 15.9%, to COP$62.6 trillion (US$16.3 billion), while 2Q 2021 investments totaled COP$770.6 billion (US$200.5 million), according to the company. Consolidated financial debt rose 16%, to COP$26.4 trillion (US$6.87 billion).
As for first half (1H) 2021 results, ISA’s net income rose 17.8%, to COP$11 trillion (US$2.86 billion), with a net margin of 21%.
EBITDA for 1H 2021 rose 7.8% year-on-year, to COP$3.4 trillion (US$885 million), while EBITDA margin came-in at 65,6%.
During 1H 2021, ISA invested COP$2.7 trillion [US$702 million] in construction of electric power transmission lines as well as for highway construction projects in Chile and Colombia.
“The entry into operation of the 230/500kV ‘Interconexión Noroccidental’ project, a megaproject that runs through 36 municipalities in the departments of Antioquia, Córdoba, and Santander, allows to ensure the reliability of the National Transmission System. This project has the first 500kV gas-insulated substations and will generate annual revenues for approximately US$42 million,” according to ISA.
On another front, “ISA developed in Colombia a project to bring drinking water to thousands of families of the Wayúu community in La Guajira. The project is called Pilas Públicas Sararao, and it is the first ‘Works for Taxes’ project developed by our affiliate ISA Intercolombia, which joins those projects already delivered in previous years in Peru,” the company added.