Colombia Peso Jumps on $3.6 Billion Ecopetrol Deal to Buy ISA
(Bloomberg) -- Colombia’s peso led gains among emerging market currencies after state-controlled oil company Ecopetrol SA signed a $3.6 billion deal with the Finance Ministry to acquire electricity transmission company Interconexion Electrica SA, or ISA. The government said it will get paid in U.S. dollars, which it will gradually convert into the local currency.
The peso rose 2.2% to close at 3,859.19 per dollar on Thursday. In an interview with Blu Radio, Finance Minister Jose Manuel Restrepo said the government will seek to avoid “unexpected shocks” in the exchange rate.
Ecopetrol agreed to pay 25,000 pesos per share ($6.3), a 16% premium on Wednesday’s closing price of 21,500 pesos, according to a regulatory filing. The contract is for 569,472,561 shares, equivalent to a 51.4% stake.
The price is in the “upper bound” of the range of valuations, Restrepo said at a press conference in Bogota on Wednesday. Ecopetrol Chief Executive Felipe Bayon said that while the deal needs to happen before Dec. 6, it will likely occur in 3 to 4 weeks.
The acquisition of the utility will speed up Ecopetrol’s transformation of its business model, Bayon said. While oil and gas will continue to be the core business, Ecopetrol aims to cut carbon emissions, invest in renewable energy and add new business lines as the world moves away from hydrocarbons.
Ecopetrol Chief Financial Officer Jaime Caballero said in a conference call with investors and analysts that the transaction will be funded 100% via debt, with a syndicated loan expected to be paid within the next two years. It can later be refinanced with a longer-term bond, he said.
Medellin-based ISA operates electricity transmission lines and toll highways in countries across Latin America. ISA shares ended the day 1.4% higher, to 21,800 pesos, while Ecopetrol erased earlier gains and fell 0.6% to 2,622 pesos per share.
Colombia will use the funds for this year’s budget, according to Restrepo.
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