The Fourth Administrative Court ruling was based upon irregularities in the sale process initiated by the city, which owns 86.4% of the telecom that offers landline phone service, mobile plans, cable television, and internet connectivity. The Peñalosa administration said that the decision was also handed down because the process fails to show the direct relationship between the sale of ETB and the financing of the mayor’s development plan for the capital.

Dalila Hernández, legal secretary for the mayor’s office, said that the city plans to file an appeal within the next 10 days to challenge the ruling. “The debate is not over, and we will be waiting for a second opportunity when the final ruling on the matter will be determined,” said Hernández.

The city kickstarted the sale in May and, according to Reuters, hoped to have its shares in ETB sold by October for upward of $775 million USD. The mayor’s office said the funds will be invested in social initiatives under its “Bogotá Better for All” development campaign.

The city plans to appeal the ruling within 10 days. “The debate is not over,” said Dalila Hernandez, legal secretary for the Peñalosa administration. (Credit: Alcaldía Mayor de Bogota)

According to José Alejandro Herrera, the city’s finance secretary, today’s court “decision compromises the financing” of all these plans, which include the construction of 18 new schools and kindergartens, six hospitals, 16 centers intended to help people with disabilities, and two cultural centers.

The proposed sale of a controlling stake in an emblematic Bogotá company has been controversial in the capital. ETB, a firm with a history that dates back more than 130 years, has long been a reliable source of revenue for the city, and several organizations have fought against the plan to sell a valuable asset to fund the agenda of an unpopular mayor.

Advocates at Unidos Revocamos a Penalosa (United to Revoke Peñalosa), a leading group campaigning to remove the mayor from office by formally triggering a re-election, have been outspoken critics of Peñalosa’s privatization plan for ETB.

An op-ed on the organization’s website, written by group member and National University political scientist Sergio Fernández, claimed that selling the telecom now would prevent the capital from continuing to reap the financial benefits of the sizable investments it made in the past to help bolster ETB.

“The history of privatizations has been a story of how the state makes large investments in strategic sectors to later sell the public assets and leave the profits in private hands,” wrote Fernández. “In short, socializing investment and privatizing profits.”

To raise capital for the city, Peñalosa, who is one of mayors in Colombia facing “revocation” campaigns under a law passed in 2015 to prevent them from fulfilling their entire term in office, has also worked to sell a 20% stake in publicly controlled energy utility Empresa de Energía de Bogotá (EEB).

Even after completing a sale of this large chunk, in a move that was approved by the city council late last year and the mayor said could fetch up to $1.4 billion USD, Bogotá would continue to be the controlling stakeholder of EEB. But as with the proposal to find a buyer for ETB, this decision was met with controversy and added momentum to the campaign to remove Peñalosa from office.

(Photo credit: Jared Wade)

“The fourth auction is part of the second stage of the equity divestment plan and the purpose is to offer publicly, in Colombia and/or abroad, the shares that were not acquired during the first, second and third auctions,” said Ecopetrol in a statement.

The public offering of its EEB shares will take place before the start of common stock trading in the Colombian Stock Exchange — Bolsa de Valores de Colombia — on February 15, “in accordance with the provisions set forth in the divestment regulation and the applicable addenda,” said Ecopetrol.

Full documentation concerning the offer (in Spanish) is available on Ecopetrol’s website. The firm’s divestment plan was approved by Colombia’s government in November 2014.

“The third auction is part of the second stage of the equity divestment plan and the purpose is to offer publicly, in Colombia and/or abroad, the shares that were not acquired during the first and second auctions,” said Ecopetrol in a statement.

The public offering of its EEB shares will take place before the start of common stock trading in the Colombian Stock Exchange — Bolsa de Valores de Colombia — on December 6, “in accordance with the provisions set forth in the divestment regulation and the applicable addenda,” said Ecopetrol.

Full documentation concerning the offer (in Spanish) is available on Ecopetrol’s website. The firm’s divestment plan was approved by Colombia’s government in November 2014.

The area is currently dominated by industrial activity, with some 80% of the buildings being warehouses, production plants, or other commercial structures. Of the 3,000 planned residences in a development initiative that covers 20 hectares, the mayor’s office said that 584 of them are a priority project.

More two hectares of the area, a small triangular area emerging from the intersection of Avenida Las Americas and Avenida NQS, will go to parks and malls, while nearly three hectares will become public spaces. At least three hectares will become roadways (or be the the site where existing roads are improved).

An aerial view of the planned development area, the Triangulo de Bavaria in Bogotá’s Puente Arnanda neighborhood. (Credit: Bogota.gov)

The area is both active and popular, as it sits nearby both the massive Corferias conference and exhibition grounds and the renowned Paloquemao food market that fills tables in the capital everywhere from humble kitchens to five-star restaurants.

“We will benefit about 10,000 people by developing residential areas in the city center and thus preventing more citizens from moving to sectors outside of the capital,” said Peñalosa.

Peñalosa has noted the difficulty of combatting the economic forces that are pushing more and more people to the outskirts of the Bogotá. Congestion, lack of transportation, housing prices, cost of living, and other factors are leading many to move up north or to the west of the capital where life is more affordable but fewer jobs exist. Peñalosa says that once people leave, it is harder to help them because social, training, and other initiatives that he can enact within the city limits don’t stretch beyond Bogotá’s borders.

So this project is a part of Enrique Peñalosa’s larger plan to bring more development to the capital and encourage the human capital to stay. Now in office for around a year, he ran on a campaign to encourage development and improve transportation infrastructure in a city of more than eight million that is plagued by constant traffic congestion.

Last month, Peñalosa announced his plan to break ground an elevated metro and expand the current Transmilenio bus system. The mega-project is budgeted to cost $4.77 billion USD and be completed by 2022.

Last week, the mayor also got final approval from the city council to sell a 20% stake in the city-controlled utility Empresa de Energía de Bogotá (EEB). In an upcoming sale of the lucrative and highly profitable company, the mayor is seeking to bring in some $1.3 billion USD that he then plans to use to fund eight transportation projects. Citizens, employee funds, and the pension funds will have the first option to buy a portion of the shares.

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.

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

During the 2 days, senior level executives shared their experiences and learned about the opportunities and challenges facing the Andean capital markets. With over 55% of the audience being borrowers, issuers, investors and government officials and 45% attending from financial institutions, law firms and rating agencies, the 2016 event was an ideal place to engage in real business opportunities and meet prospective clients.

Colombian Finance Minister Mauricio Cardenas

Colombian Finance Minister Mauricio Cardenas opened day 1 to a room full of delegates sharing his insights into prospects for Colombian growth in 2016, and how Colombia is positioned within Latin America and the global economic community. Carlos Blanco, Director General, Debt and Public Treasury, Peruvian Ministry of Finance and Economy provided details of financing strategies to support GDP growth in Peru.

Day 2 shifted focus to infrastructure, project finance and the Colombian 4G program. Clemente del Valle, the president of Financiera de Desarrollo Nacional (Fedesarrollo) opened the day, followed by a keynote speech from Luis Fernando Andrade, President, Agencia Nacional de Infraestructura (ANIF).

Also speaking this year were representatives from Andino Investment Holding, Grupo Argos, ISA, BlackRock, Porvenir, Old Mutual and Empresa de Energía de Bogotá.

To become a sponsor in 2017 contact Francisco Vasconcelos in the United Kingdom at +44 (0) 777 284 7624 or via email at  Francisco.Vasconcelos@GFCConferences.com.

Finance Colombia participated in Bonds, Loans, & Derivatives 2016 as a media partner.

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 ownership at the beginning of Q4, 2015  (Details in appendix below). Graphic by Finance Colombia of data provided by Isagen

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.

President Santos discusses Isagen from Santa Marta, where he attended the presentation of new municipal water resources. (Photo courtesy of the Presidencia de Colombia)

“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.

Minister of Transport Natalia Abello says the sale of Isagen is key to the success of the 4G highway modernization project. (Photo courtesy Mintransporte)

“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

Chart data courtesy Wikipedia

Construction during 2014 on Rotor 1 of Isagen’s Sogamoso Hydroelectric Facility (Photo courtesy Isagen).

Current significant shareholders in Isagen: