Ahead of Vote, Bogotá City Council Debates Mayor’s Plan to Sell EEB Shares for $1.4 Billion USD

Today, the city council of Bogotá is debating a vote on a proposed project by Mayor Enrique Peñalosa to sell 20% of the shares of the Empresa de Energia de Bogotá (EEB). The mayor is looking for a return of at least 4 trillion pesos ($1.35 billion USD), but he faces strong opposition from representatives of the Social Party of National Unity, known locally as El Partido de la U.

The mayor’s plan would give citizens, employee funds, and pension funds the first option to buy a portion of the shares. The share price has yet to be be announced.

The mayor of Colombia’s capital has explained that the money will be used for at least eight infrastructure projects aimed at easing the city’s onerous traffic problems. Incoming funds would go towards the construction of new roads and a regional train to connect Bogotá with outlying towns where millions of people live and work.

Throughout the capital’s history, there have been ongoing and contentious debates against selling any public property, generally including strong opposition from unions and labor-focused political parties. Some of the politicians at the city council have declared that the sale of the 20% of the EEB is something of a personal business for the mayor Peñalosa, who in previous years was accused of receiving benefits from contractors during the construction of the city’s Transmilenio bus system.

Some of the voters against the sale argued that the EEB has been the only public company consistently sending profits to the city for the last two decades. So selling another portion of it will only further reduce the public earnings in the future.

The privatization of these shares also follows the national government’s decision, led by President Juan Manual Santos, to sell public utility Isagen earlier this year in January. Also in an effort to fund infrastructure works, President Santos sold the Medellín-based power company for some $2 billion USD to Brookfield Asset Management, which is headquartered in Toronto.

Recent polls have shown that Peñalosa’s initiative is supported by most of the city council members, however. That means that even with the union criticism and some council members voting against the sale, it likely will be approved.

“The sale of the shares of the EEB means that the city will have immediate resources without new debt and will help to protect its ratings in the international agencies,” said Camilo Silva, co-founder of the firm Valora Inversiones.

Fitch Ratings analysts 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. Standard and Poor’s has the city at a BBB-, while Moody’s has assigned it Baa2.

Photo Credit: Grupo Energia de Bogotá