Isagen Auction Slated For Wednesday, Canadian & Chilean Firms Brookfield & Colbún To Vie For The Colombian Power Generator
UPDATE: According to Colombia Reports, Chile’s Colbun drops out of bidding for Colombia’s Isagen on Monday, January 11, 2 days before the slated auction
After a series of debates in Congress and conflicting positions between Colombian political parties, the Colombian government has announced the official auction date for companies interested in buying the majority percentage of Isagen shares (BVC:ISAGEN) held by the national government. The companies that are participating in the negotiation must make an offer on January 13 of 2016.
Above photo: Isagen’s Sogamoso Hydroelectric Dam (Photo courtesy Isagen)
Isagen is a power generation and distribution company headquartered in Medellin, with regional offices in Bogota, Cali and Barranquilla. The Colombian government controls Isagen, owning 57.61% of the shares. The City of Medellin, through Empresas Públicas de Medellin (EPM) owns 13.14%, Grupo Energia de Bogotá (EEB), 76.52% owned by the city of Bogotá owns 2.52%, and the rest of the shares are owned by institutional and retail investors.
Isagen ownership (click graph to enlarge)
Isagen is the third largest generator of energy in Colombia with 16% of the country’s grid (National Interconnected System (SIN) capacity. In addition, It has an installed capacity of 3,032 megawatts (MW) from five hydroelectric plants, and one thermoelectric plant. Isagen has a market capitalization of $9.32 trillion pesos ($2.85 billion USD). There are 2.73 billion shares outstanding, and 728.53 million are issued publicly. Friday, the shares closed at $3,420 COP ($1.05 USD per share).
In 2014 the Santos administration announced its intention to sell the national government’s stake in Isagen in order to fund the country’s ambitious multibillion-(US) dollar highway modernization and upgrade project, known as 4G. The government announced the auction date for May 15, 2015, but opposition parties with diverse motives in Colombia’s congress and a group of activists filed legal actions attempting to block the sale, resulting in delays and court battles that the executive branch has apparently won.
“Hopefully the opponents will not resort to dishonest arguments that these resources are sold to cover fiscal ‘holes.’ It has been said in every possible way that the resources are going to Financiera de Desarrollo Nacional (FDN-Colombia’s capital projects treasury), and will leverage the great infrastructure investments that we need, and that the country is modernizing like never before, and these resources are very important at this moment,” said President Juan Manuel Santos.
Colombia’s highway network has been a weak link in the country’s transportation infrastructure, and has held back economic development, especially compared to the countries Colombia competes with economically, like México and Brasíl. For example, Medellín and Bogotá are only 260 miles apart (419km), but road travel can easily take over 10 hours, much of the trip over two-lane, low-speed roads. None of Colombia’s major cities have internal or outerbelt freeways. Bogotá and Cartagena have infamous traffic problems. Away from the major cities, connectivity can be even more challenging, making freight transport notoriously expensive. Colombia’s very limited heavy rail network is mostly dedicated to coal and bulk transport.
“Isagen is an asset that produces a dividend, a profit, but that profit is very low compared with what that same money, belonging to Colombians, can render, for example, leveraging the financing of large highways, large projects that the country needs,” said Santos while attending an event opening new municipal water wells in the Atlantic coastal city of Santa Marta. “Nobody has any conspiracy regarding Isagen. The energy can be provided by the public sector or the private sector without affecting a single electricity user, because energy is a very highly regulated industry. What affects Colombians is the regulation, and not who supplies the energy.”
Isagen produces 16.4% of Colombia’s electrical consumption.
According to President Santos, the 4G highways modernization project is the most ambitious construction and modernization project in the history of the country, and will generate dozens of thousands of jobs in rural areas of the country, and will feed economic growth during construction, operation, and maintenance phases.
“To invest the resources from the sale of Isagen in infrastructure will have more economic and social benefits because they will contribute to the financing of the highways by private enterprise, where they will not require public backing to operate, but require capital investment by consessionaries in the construction phase. In 2016, for what we expect from private initiatives, these resources will be very important,” said Minister of Transport Natalia Abello in a statement.
For the auction that was to be held in May of 2015, the minimum bid was set at $3,399 Colombian pesos (COP). At that price, the minimum value of Isagen would have been $6.48 billion COP. At the time, there were seven potential bidders that had indicated interest. In December, President Santos’ cabinet, the Consejo de Ministros revised the valuation to $4,130 pesos per share; an increase of 21.5%
On Monday, December 28, Minhacienda, the Ministry of Public Finance and Credit said that two companies have submitted monetary guarantees required to participate in Wednesday’s auction: BRE Colombia Investments LP, an investment fund of Canada’s Brookfield Asset Management, and Consorcio del Pacifico (Pacific Consortium), an entity owned by Chile based electrical generator Colbún.
Brookfield Asset Management is a Canadian company that focuses on property, renewable energy, infrastructure and private equity in North and South America, Australia, Asia, and Europe. Brookfield Asset Management currently has over $225 billion USD in assets under management.
Colbún SA is a Chilean electrical producer with an installed generation capacity of 3,278 megawatts. Colbun has no activities in the Colombian electricity sector, but in Chile it operates 15 hydroelectric plants, 7 thermal plants and 17 substations. According to Colbún General Manager Thomas Keller Lippold, “Colbún S.A. has analyzed and studied Isagen´s history, (¨due diligence¨) and it is prequalified to make an offer.”
Another company that considered making an offer for Isagen but apparently has dropped out, was Engie, a French energy company active in electrical generation and distribution, natural gas and renewable energy, across 15 countries, including Canada, Portugal, Italy, Belgium, the Netherlands, Chile and the USA. As of publication, the company has not formalized its intention to make an offer to the government of Colombia.
Isagen-owned power generation facilities in Colombia
|Power Generation Plant||Location||Installed Capacity|
|Central Hidroeléctrica San Carlos||San Carlos (Antioquia)||1240 (MW)|
|Central hidroeléctrica Jaguas||San Rafael (Antioquia)||170 (MW)|
|Central hidroeléctrica Calderas||Granada (Antioquia)||26 (MW)|
|Central Hidroeléctrica Miel I||Norcasia (Caldas)||396 (MW)|
|Central térmica Termocentro||Cimitarra (Santander)||300 (MW)|
|Central hidroeléctrica Amoyá||Chaparral (Tolima)||80 (MW)|
|Central hidroeléctrica Sogamoso||Betulia (Santander)||820 (MW)|
Chart data courtesy Wikipedia
Current significant shareholders in Isagen:
|Government of Colombia via Ministerio de Hacienda y Crédito Público||57.61%||1,570,490,767|
|Empresas Públicas de Medellín (Owned by City of Medellín)||13.14%||358,332,000|
|Fondo de Pensiones Obligatorias Porvenir Moderado||4.73%||128,876,627|
|Empresa de Energía de Bogotá (76.28% owned by City of Bogotá)||2.52%||68,716,000|
|Fondo de Pensiones Obligatorias Protección Moderado||2.45%||66,798,425|
|Fondo de Pensiones Obligatorias Colfondos Moderado||1.33%||36,260,800|
|Old Mutual Fondo de Pensiones Obligatorias Moderado||1.05%||28,673,033|
|Columbia Acorn International||0.86%||23,377,000|
|Fondo Bursatil Ishares Colcap||0.59%||16,066,593|
|Vanguard Emerging Markerts Stock Index Fund||0.50%||13,646,632|
|Fondo de Cesantias Porvenir||0.43%||11,671,975|
|Old Mutual Fondo de Pensiones Voluntarias||0.43%||11,648,755|
|Abu Dhabi Investment Authority J.P. MORGAN||0.40%||10,789,175|
|Vanguard Total International Stock Index Fund||0.28%||7,671,821|
|Fondo de Cesantias Protección – Largo Plazo||0.25%||6,803,944|
|Fondo de Pensiones Protección – Altern Cerrada ISAGEN||0.25%||6,729,269|
|Fondo Abierto Por Compartimientos Valores Bancolombia||0.24%||6,596,117|
|BlackRock Institutional Trust Company N.A.||0.23%||6,257,460|
|Ishares MSCI Emergi Markets Minimum Volatility ETF||0.21%||5,694,000|
|Ishares MSCI Emerging Markets ETF||0.21%||5,624,106|
|Individuals & Other Retail Investors||12.30%||
|Total Shares Outstanding||100.00%||