This article is a contribution to Finance Colombia from Rodrigo Torres, a Colombian journalist living in New York.
Yesterday, with 32 votes in favor and 12 against, the plenary of the city council of Bogotá approved Mayor Enrique Peñalosa’s plan to sell 20% of public utility Empresa de Energia de Bogota (EEB). The mayor is seeking to raise raise up to 4 trillion Colombian pesos (roughly $1.4 billion USD) for the local government to invest in new infrastructure, especially highways and a regional train.
Last week, the finance commission of the city council approved the mayor’s initiative seeking funds to build the highways that he says 10 million people urgently need to improve productivity and reduce contamination in the capital. With the approval, citizens, employee funds, and the pension funds will have the first option to buy a portion of the shares.
Photo: EEB is involved in electricity, energy, and infrastructure projects, and has long been one of the most reliable revenue sources for the capital. (Credit: EEB)
Though many citizens have vocally opposed the move, Bogotá will still retain its majority share in the public utility — with a stake of around 56% — even after the selloff. The next step of the process will be the publication in a national newspaper to let the public know about the price of each share of EEB and the deadline for the investment within a local broker.
Bogotá has been expanding rapidly in recent decades as millions of people have come to the capital looking for a better way of life away from the rural war against armed groups. This has exacerbated the massive, constant traffic problems in a city with more than 1.5 million cars on the streets.
Bogotá remains one of the biggest cities in the world without an underground or elevated metro system, and a commuter restriction — which uses a license-plate restriction to prohibit cars from trafficking city roads two workdays each week — has done little to truly ease the congestion. This fall, Peñalosa unveiled a $4.8 billion USD plan to build an elevated metro and expand the existing Transmileno bus system, but much of this remains a half-decade away from completion.
“[The funds] will become a spearhead to financially leverage multiple works that are not only contemplated within the development plan but that will be vital to update the battered transport infrastructure in the capital,” said Juan Martín Caicedo Ferrer, president of the Colombian Chamber of Infrastructure.
The incoming revenue may also help alleviate concern about the city’s finances. Fitch Ratings said recently that the city’s debt is under pressure, which could constrain its ability to receive credit from international sources. After a one-notch downgrade this summer, Bogotá now has a BBB rating from Fitch, just two notches above junk status. Standard and Poor’s has the city at a BBB-, while Moody’s has assigned it Baa2.
The Bogota city council is also expected to vote on another proposal as soon as today. The board of directors of EEB is proposing to sell several investments that it considers to have no strategic importance to its plan for growth in the coming years.
If it receives that authorization, EEB is expected to attempt to raise more than a trillion Colombian pesos (approximately $339 million USD) to focus on the gas and energy business.