Grupo Energía Bogotá (BVC: GEB) and La Caisse, the investment arm of Caisse de dépôt et placement du Québec, have signed a final agreement to merge their respective Brazilian power transmission assets into a single 50/50 jointly controlled platform operating under the name Verene Energia S.A. The transaction was announced May 15, 2026, from Montréal and Bogotá.

The combined entity will consolidate 26 electric transmission concession agreements, more than 9,000 km of transmission lines, and a workforce of over 400 employees across 17 Brazilian states. At that scale, Verene will rank among the five largest power transmission operators in Brazil, a market that has drawn sustained interest from international infrastructure investors as the country advances grid modernization programs.

Verene, which had previously operated as La Caisse’s dedicated transmission platform in Brazil, will continue as the reference vehicle for the combined portfolio. The partners have indicated that the platform will be positioned to pursue acquisitions and network expansions in Brazil’s transmission concession market, with grid modernization and decarbonization cited as the broader policy context driving new investment opportunities.

“By bringing together highly complementary assets under one banner, the partnership establishes Verene as a scaled, business-driven platform with strong financial backing.” — Emmanuel Jaclot, Executive Vice-President and Head of Infrastructure and Sustainability, La Caisse

Grupo Energía Bogotá, headquartered in Bogotá and listed on the Bolsa de Valores de Colombia (BVC: GEB), has operated in Latin America’s energy sector for more than 130 years. The company holds assets in electricity generation, transmission, distribution, and gas transportation and distribution across Colombia, Peru, Brazil, and Guatemala. Its entry into the joint venture contributes its existing Brazilian transmission concessions to the merged platform alongside La Caisse’s Verene assets.

La Caisse manages net assets of 517 billion CAD as of December 31, 2025, on behalf of 48 depositors representing more than six million Quebecers. The fund is active across major financial markets, private equity, infrastructure, real estate, and private credit, and has built a significant infrastructure portfolio in Latin America through investments including the Verene platform.

Juan Ricardo Ortega, president of Grupo Energía Bogotá, described the rationale for the transaction in terms of combining complementary strengths. “By combining our operational expertise and regional market knowledge with the financial strength and global perspective of our partner, we are creating a platform positioned to accelerate growth, expand transmission energy infrastructure, and support Brazil’s energy transition,” he said. “We believe this alliance will generate sustainable value for our stakeholders and contribute to Brazil’s economic and energy development.”

Emmanuel Jaclot, executive vice-president and head of infrastructure and sustainability at La Caisse, framed the deal as a consolidation play. “By bringing together highly complementary assets under one banner, the partnership establishes Verene as a scaled, business-driven platform with strong financial backing,” Jaclot said. “GEB brings more than 130 years of operating heritage and ranks among Latin America’s leading energy infrastructure groups, with deep expertise across the region’s transmission sector. Together, we share a vision to strengthen Verene’s footprint in Brazil through value-creating acquisitions and continued support for the country’s energy transition.”

Financial close is expected by the fourth quarter of 2026, subject to customary closing conditions, regulatory consents, and approvals. BTG Pactual (BVMF: BPAC11) acted as financial advisor to La Caisse, with Pinheiro Neto Advogados serving as legal counsel. Citibank (NYSE: C) advised Grupo Energía Bogotá on the financial side, while Mayer Brown provided legal advice to GEB.

The affirmation of GEB’s ratings reflects its stable cash flow, business position, and adequate liquidity. Fitch anticipates the company’s credit metrics will remain consistent with its rating over the medium term. However, the ratings also account for GEB’s reliance on dividends from subsidiaries, its ongoing growth strategy, and a high dividend payout policy.

GEB operates a diversified portfolio of regulated businesses in electricity and natural gas transport and distribution. Its primary subsidiaries, Transportadora de Gas Internacional S.A. E.S.P. (BBB/Negative) and Gas Natural de Lima y Callao S.A. (Cálidda) (BBB/Stable), are the main contributors to its EBITDA, representing more than 70% of EBITDA from controlled companies. Dividends from its non-controlling stake in Enel Colombia S.A. E.S.P. (BBB/Negative) are expected to be the main source of dividends, averaging 60%.

Fitch projects GEB’s EBITDA leverage to increase to 4.2x in 2026 from 4.0x in 2024. The company’s free cash flow is projected to remain negative in 2025 and 2026, driven by higher capital expenditures and a dividend payout ratio of approximately 70%. GEB’s investment program is estimated to total around $1.5 billion from 2025 to 2028, with 44% directed to transmission projects in Colombia and 30% to natural gas transportation.

GEB’s credit profile is comparable to its investment-grade peers. Its ‘BBB’ rating is one notch below Enel Américas S.A. (BVC: ENELAM) (BBB+/Stable) and two notches above Empresas Públicas de Medellín E.S.P. (EPM) (BVC: EPM) (BB+/Negative). Enel Américas has a more conservative capital structure and a wider geographic footprint. EPM’s rating is linked to that of its owner, the city of Medellín. GEB is rated one notch above both AES Andes S.A. (SNSE: AESANDES) (BBB-/Stable) and Promigas S.A. E.S.P. (Promigas) (BBB-/Stable), due to its business concentration in a regulated environment compared to AES Andes, and its greater business and geographic diversification compared to Promigas.

The rating of GEB is not capped by the credit profile of its controlling owner due to regulatory ring-fencing mechanisms, material minority shareholders, and strong governance practices. These factors, under Fitch’s Parent-Subsidiary Rating Criteria, allow GEB to be rated two notches above Bogotá’s consolidated profile of (BB+/Negative).

GEB’s exposure to regulatory risk is considered low to moderate, with its geographic diversification and the strong business positions of its subsidiaries mitigating a concentration in regulated businesses in Colombia. The company’s rating is also above Colombia’s Country Ceiling (BBB-) because its applicable Country Ceiling is that of Peru (A-), reflecting the significant EBITDA generated by its Peruvian subsidiary Cálidda and dividends from its stakes in Peruvian transmission companies Consorcio Transmantaro and Red de Energía del Perú. These cash flows are sufficient to cover GEB’s foreign-currency interest payments.

GEB’s liquidity is supported by cash on hand, predictable cash flow from operations, and access to capital markets. As of June 2025, the company had approximately $327 million in cash and equivalents. It faces near-term debt maturities of $259 million in the remainder of 2025 and $495 million in 2026, which Fitch expects the company to refinance successfully.

Grupo Energía Bogotá. Photo credit: Grupo Energía Bogotá/Facebook.

The affirmation of TGI’s ratings reflects a connection to its parent company, Grupo Energia Bogotá S.A. E.S.P. (GEB) (OTCMKTS: GEB; BVC: GEB), based on what Fitch describes as medium-to-high operational and strategic incentives for GEB to support TGI. The negative outlook is consistent with Fitch’s outlook on the sovereign rating for Colombia (BB+/negative), as TGI’s cash flow is generated almost entirely within the country.

The ratings also consider the company’s position in the Colombian natural gas transportation sector, regulatory risk exposure, and capital structure. Fitch noted that the ratings also account for re-contracting risk due to a lower supply of long-term gas supply contracts.

Key Rating Drivers

Parent-Subsidiary Linkage: Fitch’s analysis of the relationship between GEB and TGI indicates a high strategic linkage, a medium operational linkage, and a low legal relationship. This is assessed using a “top-down minus one” approach, where a subsidiary’s standalone credit profile (SCP) is considered one notch below that of a stronger parent. In this case, TGI’s SCP is deemed susceptible to Colombia’s operating environment due to its domestic cash flow generation. The ratings are equalized because TGI’s SCP is one notch lower than GEB’s.

GEB’s incentives to support TGI include its nearly 100% ownership and TGI’s substantial financial contribution, which accounted for approximately 45% of GEB’s operating EBITDA at year-end 2024. Fitch expects GEB to continue its strategic focus on investing in Colombia’s midstream businesses, such as TGI.

Change in Contract Dynamics: The availability of long-term gas supply contracts has diminished, affecting commercial contracting dynamics. Regulatory changes have introduced more flexibility in gas commercialization, enabling short-term transportation contracts that align with the terms of supply agreements. This has led to lower contracted capacity for TGI, but Fitch anticipates the company will be able to renew contracts with its customers. These customers are considered part of the structural demand derived from the cities of Bogotá and Medellín, as well as the Barrancabermeja Refinery operated by Ecopetrol S.A. (NYSE: EC; BVC: ECO).

As of June 2025, TGI’s contracted capacity had an average life of 2.6 years. Fitch projects that transported volume will remain at approximately 460 million cubic feet per day (Mcfpd) between 2026 and 2027, consistent with current volumes. The average life of contracts is expected to continue decreasing as legacy agreements are renewed with shorter maturities.

Business Profile: TGI is a natural gas transporter in Colombia, with a 55% market share of transported volume. Its scale and geographic footprint provide predictability to its cash flow generation. The company’s customer base is moderately concentrated, with four distribution and marketing customers representing about 81% of revenues as of June 2025. Residential and industrial sectors accounted for 93% of revenues, providing a stable consumption pattern.

Financial Discipline and Capital Expenditures: Fitch anticipates TGI will maintain its financial discipline. EBITDA leverage is projected to peak at 2.3x at year-end 2025, influenced by lower regulatory revenues from reduced contracted volumes. Leverage is expected to decline to around 2.0x in 2026 following the implementation of a new tariff scheme. The analysis assumes TGI will fund both maintenance and expansionary capital expenditures without increasing debt levels and will maintain a dividend payout ratio of 90% of the previous year’s net income. The company has also employed hedging strategies to reduce exposure to the US dollar.

TGI is considering several projects to ensure a reliable gas supply to the interior of the country, including pipeline bidirectionality, infrastructure expansion, and a new pipeline connection in La Guajira to a Floating Storage and Regasification Unit (FSRU). While the La Guajira project may pressure free cash flow in 2026 and 2027, it is expected to strengthen the gas supply network.

Peer Analysis: TGI’s credit profile is categorized as investment-grade, with predictable EBITDA generation consistent with natural gas transportation companies such as Transportadora de Gas del Peru, S.A. (TGP) (BVL: TGP). TGI is also positioned against other regional peers in the natural gas distribution and liquefied natural gas sectors, including Gas Natural de Lima y Callao S.A. (BVL: CNL), Promigas S.A. E.S.P. (BVC: PROMIGAS), and GNL Quintero S.A.

TGI is rated one notch above Promigas due to its more conservative capital structure, with leverage below 3.0x compared to Promigas’s range of 3.5x to 4.0x. TGI’s rating is one notch below TGP, as TGP’s revenue is derived from long-term ship-or-pay contracts with a remaining average life of approximately six years, while TGI’s average contract length is 2.8 years.

The ratings also reflect the strategic and operational incentives for GEB to support TGI. In 2007, GEB provided a $370 million USD shareholder loan to TGI, which was repaid in 2023. Fitch believes that GEB could provide further support if necessary.

Liquidity and Debt Structure

As of June 2025, TGI’s cash on hand was approximately $594 billion COP, an increase from $476 billion COP in December 2024. During the first quarter of 2025, the company reduced the interest rate on its “Club Deal” facility and prepaid $50 billion COP. The Club Deal loan, which refinanced an intercompany loan from GEB in 2023, is the company’s only significant debt maturity until December 2027.

Natural gas well. (Photo credit: Ken Doerr)

The ratings are supported by Promigas’s strong business position in the natural gas transportation and distribution sectors in Colombia. These segments are regulated and function as natural monopolies, contributing to stable and predictable cash flows that mitigate re-contracting risk.

Fitch withdrew the ‘AAA(col)’ rating for the Surtidora de Gas del Caribe S.A. E.S.P. (Surtigas) local bond issuance of $330 billion COP from 2024 due to its expiration.

Key Rating Drivers

Solid Business Position

Promigas’s ratings reflect a low business risk profile, stemming from stable and predictable cash flow generation and a strong competitive position. Promigas is the second-largest natural gas transporter in Colombia, serving the Caribbean coast region. Its 3,290 kilometers of pipelines account for approximately 46% of the national network. The company is also a significant player in natural gas distribution, reaching about 38% of connected users nationwide through subsidiaries and non-controlled holdings.

Promigas’s 51% stake in Sociedad Portuaria El Cayao S.A. E.S.P. (SPEC), a liquefied natural gas (LNG) terminal, provides added flexibility to supply imported natural gas to thermoelectric plants along the coast, bolstering its capacity to meet demand fluctuations. The country ceiling applicable to Promigas is determined by Peru’s ‘A-‘ rating, as the EBITDA generated by its Peruvian subsidiaries and dividends from its 40% stake in Gas Natural de Lima y Callao S.A. (Cálidda) (BVL: CALIDDA) (IDR ‘BBB’ Stable Outlook) are sufficient to cover consolidated foreign currency interest payments.

Promigas’s cash flow is supported by operations diversified across natural gas transportation, distribution, and electric power distribution. The transportation segment, which accounts for 52.4% of consolidated EBITDA, is backed by medium-term take-or-pay contracts with capacity payments exceeding 80%, reducing volumetric risk. The gas distribution segment, contributing 30% of EBITDA, operates under a regulatory framework with low demand volatility and solid cash flows. Cash flow stability is further enhanced by dividends from non-controlled companies, which average $245 billion COP annually. The projected growth of the Peruvian market is expected to increase its share of gas distribution EBITDA from 21% to 47% over the next three years.

Recent regulatory changes aimed at increasing gas supply flexibility are credit-neutral for Promigas. The new framework allows for greater flexibility in supply contract renewal periods, facilitating shorter-term renewals, which affects transportation contract renewals in the sector. The impact on Promigas’s average contract duration remains limited, as the company maintains an average term of six years. Contractual conditions are stable, supported by Promigas’s role as critical infrastructure for the country’s gas import and transport, which supports contract renewal expectations.

Negative Free Cash Flow

Promigas’s free cash flow (FCF) is expected to remain negative in the short and medium term, continuing a five-year trend of structurally negative FCF. This is attributed to high working capital requirements in its financial services segment, high capital expenditures (capex), and consistent dividend distribution. Fluctuations in working capital, stemming from financing the non-bank financial services business and delays in subsidy payments, require significant cash resources and limit operating cash flow (OCF) available for investment. Promigas’s participation in strategic projects, such as pipeline bidirectionality, infrastructure expansion, and alternative pipeline enablement under the national supply plan, will maintain high investment requirements. Consolidated capex from 2025 to 2029 is projected at $5.6 trillion COP, with 61% allocated to transportation.

Fitch’s base case projects that gross leverage, unadjusted for financial services, will remain near 4.3x, and adjusted leverage at 4x in the coming years, leaving limited room relative to rating sensitivities. In 2024, unadjusted leverage reached 4.2x and adjusted leverage was 3.9x, supported by strong cash generation from thermoelectric demand. Fitch’s base case does not include the tariff modification planned for 2027.

To ensure comparability with other rated issuers, Fitch adjusts reported debt and EBITDA to reflect the operations of the financial services program Brilla and estimates a capital allocation for this segment, considering its risk profile. An increase in the delinquency of the loan portfolio managed by gas distributors has required additional debt resources, putting pressure on credit metrics.

Gases de Occidente S.A. E.S.P. (GDO) and Surtigas, both rated ‘AAA(col)’, have the highest independent national ratings and do not receive benefits from their parent company, Promigas. Their ratings are supported by strong business profiles, stable operational generation, low demand variability, and regulated tariffs. Fitch projects that GDO’s consolidated leverage will remain below 4x, with adjusted leverage around 2.5x. For Surtigas, leverage is expected to peak at 4.3x in 2025 due to higher working capital needs. Both companies maintain adequate liquidity, supported by available cash, predictable operations, and reliable market access.

Peer Analysis

Promigas maintains a credit profile consistent with its investment-grade rating. Its low business risk reflects its participation in regulated businesses and its strong position in the natural gas transportation and distribution sectors in Colombia.

Promigas’s ‘BBB-‘ IDRs are one notch below those of Transportadora de Gas Internacional S.A. E.S.P. (TGI) (BBB Negative Outlook) and Cálidda (BBB Stable Outlook). These companies benefit from more conservative capital structures and operate in countries with similar operational environments, such as Colombia and Peru.

Promigas’s credit profile is positioned between that of other operational holding companies in Colombia, such as Empresas Públicas de Medellín S.A. E.S.P. (EPM) (BB+ Negative Outlook) and Grupo Energía Bogotá S.A. E.S.P. (GEB) (BBB Negative Outlook). Promigas’s IDR is one notch below GEB’s due to its lower business and geographical diversification and structurally negative FCF generation, which results in higher leverage levels than GEB’s in the medium term.

The rating actions were based on a review conducted on August 21, 2025, with committee members Natalia O’Byrne (chair), Gustavo Mueller, and Adriana Eraso. The credit rating opinion provided by Fitch Ratings Colombia S.A. Sociedad Calificadora de Valores is a professional assessment and does not constitute a recommendation to buy, sell, or hold a security, nor does it guarantee the fulfillment of the rated entity’s obligations.

Promigas. Photo credit: Promigas/Facebook.

Fitch affirmed Ecopetrol S.A.‘s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at ‘BB+’ and revised the outlook to negative from stable, reflecting the change in the rating outlook of the Republic of Colombia’s IDR (BB+/Negative).

The strong linkage to the sovereign reflects Colombia’s credit profile. The ratings also reflect the Colombian government’s significant incentive to support Ecopetrol in the event of financial distress. This support stems from Ecopetrol’s strategic importance as a key liquid fuel supplier in Colombia and owner of 100% of the country’s refining capacity.

Fitch affirmed Interconexion Electrica S.A. E.S.P.’s (ISA) Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at ‘BBB’ and revised the outlook to negative from stable, in line with Ecopetrol. ISA’s credit profile matches its ‘BBB’ rating and is not limited by the credit profile of its controlling owner, Ecopetrol. According to Fitch’s “Parent and Subsidiary Linkage Rating Criteria,” because Ecopetrol owns more than 51% of ISA, linkage should be considered in the assessment. The presence of regulatory ring-fencing mechanisms, material minority shareholders, and a track record of strong governance practices prevents Ecopetrol’s capacity to extract value from its stronger subsidiary.

Fitch views ISA’s funding and cash management policies as highly autonomous from Ecopetrol, expects ISA to maintain its independence, positively reflected in the ratings. Consequently, ISA’s ratings result from a ‘consolidate plus two’ approach to an IDR of ‘BBB’. Any changes in ISA’s corporate governance, business, or financial strategy may exert downward pressure on the company, particularly in the event of a structural increase in its dividend payout ratio.

Fitch affirmed Oleoducto Central S.A. (OCENSA)‘s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at ‘BB+’ and revised the outlook to negative from stable, in line with Ecopetrol. OCENSA’s ratings reflect its linkage with Ecopetrol’s credit profile, the largest crude oil producer in Colombia and OCENSA’s main off-taker. OCENSA’s operations are integral to Ecopetrol’s core business due to operational synergies. Ecopetrol relies heavily on OCENSA’s infrastructure to transport crude oil from production fields to refineries and export terminals. Fitch considers OCENSA strategically important for Ecopetrol because it transported 82% of Ecopetrol’s crude oil production in 2Q24.

Fitch affirmed A.I. Candelaria (Spain), S.A.’s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at ‘BB’ and revised the outlook to negative from stable, in line with OCENSA. A.I. Candelaria’s outstanding notes will remain structurally subordinated to OCENSA’s outstanding $400 million USD notes. As the holding company, A.I. Candelaria depends on dividends from OCENSA to service its obligations. Therefore, a substantial leverage increase at OCENSA could increase the structural subordination of A.I. Candelaria’s creditors.

This risk is mitigated by OCENSA’s record of stable dividend distributions and A.I. Candelaria’s right to veto changes to OCENSA’s dividend policy and capex plans above $100 million USD. Fitch believes the projected dividend stream will be more than sufficient to cover interest expense and principal payments on A.I. Candelaria’s outstanding notes.

Fitch affirmed Grupo Energia Bogotá S.A. E.S.P. (GEB)‘s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at ‘BBB’ and revised the outlook to negative from stable, reflecting the change to the rating outlook of the IDR of Bogotá (BB+/Negative). Fitch assesses GEB’s Standalone Credit Profile (SCP) at ‘bbb’. GEB operates independently and autonomously, positively affecting its ratings.

Fitch believes regulatory ring-fencing mechanisms, material minority shareholders, and strong governance practices reduce the parent’s capacity to extract value from its stronger subsidiary. Under Fitch’s “Parent-Subsidiary Rating Criteria,” these factors lead Fitch to rate GEB two notches above Bogotá’s consolidated profile.

Fitch affirmed Transportadora de Gas Internacional S.A. ESP (TGI)‘s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at ‘BBB’ and revised the outlook to negative from stable, in line with GEB. Fitch caps TGI’s SCP at Colombia’s ‘BBB-‘ country ceiling, as 100% of the company’s 2024 EBITDA was generated in Colombia.

TGI’s ratings receive a one-notch uplift considering GEB’s medium-to-high operational and strategic incentives to support TGI, equalizing their ratings, per Fitch’s Parent-Subsidiary Linkage Criteria. These incentives reflect GEB’s nearly 100% ownership of TGI and the substantial financial contribution to GEB of approximately 45% of GEB’s operating EBITDA. Fitch also expects investment in Colombia and midstream businesses, such as TGI’s, to remain a strategic focus for GEB’s future growth.

Fitch affirmed Empresas Publicas de Medellín E.S.P. (EPM)‘s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at ‘BB+’ and revised the outlook to negative from stable, reflecting the change to the rating outlook of Medellín’s IDR (BB+/Negative). The linkage reflects the financial relevance of the company to Medellín, the lack of effective documentation that limits dividend distribution, and the city’s influence on the company’s administration and operations. EPM’s distributions contribute an average of 20% or more of government revenues and a material 20%-30% of the city’s investment budget.

Fitch affirmed Enel Colombia S.A. E.S.P.’s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at ‘BBB’ and revised the outlook to negative from stable, reflecting the change to the rating outlook of the Republic of Colombia’s IDR. The company is headquartered in Colombia (BB+/Negative), and its operation in this country represented approximately 90% of its consolidated EBITDA accumulated for the LTM ended September 2024.

Fitch caps Enel Colombia’s SCP at Colombia’s ‘bbb-‘, given the substantial cash flow generation from the country. Cash flows from the operations in Panama (BB+/Stable), Guatemala (BB/Positive), and Costa Rica (BB/Positive), exceed the company’s hard currency debt service coverage for the next 12 months by more than 1.5x.

Hidroituango hydroelectric dam. (Photo credit: EPM)

Credit Metrics and Business Position

The affirmation of GEB’s ratings reflects the company’s steady cash flow generation, robust business position, and sufficient liquidity. Fitch anticipates GEB’s credit metrics to remain consistent with its current rating over the medium term. The ratings also consider GEB’s reliance on dividends from its financially solid subsidiaries to manage its debt obligations and the company’s ongoing growth strategy, including its aggressive dividend policy.

Fitch’s analysis indicates short-term pressure on EBITDA, with an expected gross leverage of approximately 4.1x in 2024, followed by a gradual reduction to an average of 3.5x, consistent with the ‘BBB’ rating category.

Leverage and Revenue Considerations

The appreciation of the Colombian peso against the U.S. dollar in 2024 has negatively affected GEB’s subsidiary, Gas Natural de Lima y Callao S.A. (Cálidda), due to foreign exchange exposure. Additionally, a reduction in dividends from Enel Colombia, estimated at USD 202 million, is expected to impact EBITDA in 2024. However, this will be partially offset by increased revenue from the transmission business and significant dividend payments from Enel Colombia in 2025, alongside retained earnings from the Argo subsidiary in Brazil in 2024 and 2025.

In 2025, contracted demand at Transportadora de Gas Internacional S.A. ESP (TGI) is projected to decline, leading to reduced revenue from the gas transportation business. No major acquisitions are expected in the near term. Consequently, Fitch forecasts GEB’s gross leverage to rise to 4.1x in 2024, with a decrease to 3.9x in 2025 and 3.5x in 2026.

Diversified Operations and Cash Flow Stability

GEB’s ratings are supported by its diversified portfolio of regulated businesses, primarily consisting of entities with strong market positions and solid credit profiles. The company operates in Colombia’s electricity transmission sector and participates in electricity generation and distribution through its associate, Enel Colombia. GEB also holds controlling stakes in energy assets functioning as regulated monopolies in their service areas. TGI, Colombia’s largest natural gas transportation company, is fully owned by GEB, which also has a 60% stake in Cálidda, the largest natural gas distribution company in Peru.

GEB’s operations benefit from business diversification, with subsidiaries that generally operate as regulated monopolies, contributing to stable and predictable cash flow. TGI is GEB’s most significant asset, expected to generate 47% of EBITDA from controlled companies in 2024. The electricity transmission business is anticipated to increase its EBITDA contribution in the medium term, supported by planned investments of approximately USD 637 million from 2024 to 2027.

Credit Quality and Regulatory Considerations

As an operating holding company, GEB derives its cash flow mainly from dividends from subsidiaries and non-controlling stakes in primarily investment-grade entities. This predictable income stream helps mitigate the structural subordination of dividends to GEB’s debt service obligations. Enel Colombia is expected to provide 53% of GEB’s dividends from non-controlling interests in 2024.

Fitch considers GEB’s exposure to regulatory risk as low to moderate, despite its concentration in regulated businesses within Colombia. Recent regulatory developments, including attempts by President Petro to influence public service regulations, present potential risks. However, tariff structures in Colombia have maintained a balance between company and end-client interests, and GEB’s geographic diversification and strong subsidiary business positions partially offset this risk.

Parent-Subsidiary Dynamics and Credit Comparisons

GEB’s credit profile aligns with its ‘BBB’ rating and is not constrained by its controlling owner, Bogotá, Capital District. Regulatory mechanisms, significant minority shareholders, and strong governance practices limit the parent’s influence on GEB, enabling Fitch to rate GEB two notches above Bogotá’s consolidated profile.

GEB’s ratings reflect a low business-risk profile consistent with an investment-grade rating. Compared to peers like Enel Americas S.A. (BBB+/Stable) and Promigas (BBB-/Stable), GEB’s ratings are lower due to its higher leverage, projected to average 3.5x, compared to Enel Americas’ leverage below 2.0x. GEB’s ratings are above those of Empresas Públicas de Medellín E.S.P. (BB+/Rating Watch Negative), which faces higher risk due to its dependence on the competitive electricity generation business and its connection to the City of Medellín’s credit profile.

Outlook and Potential Rating Actions

A positive rating action for GEB is unlikely in the near to medium term due to anticipated EBITDA pressures and potential capex increases. However, a sustained reduction in leverage below 2.5x after the completion of regulatory tariff resets and the investment program could positively impact the ratings.

Conversely, negative rating actions could result from sustained gross leverage above 4.0x, negative influence from shareholders leading to a weakened financial strategy, large acquisitions funded primarily by debt, or significant delays and cost overruns in major projects.

Liquidity and Debt Management

GEB’s liquidity remains adequate, supported by high cash reserves, predictable operational cash flow, and reliable access to bank and capital markets. As of June 2024, GEB held approximately USD 539 million in cash and equivalents, with an estimated cash flow from operations of around USD 730 million for the year. The company faces near-term debt maturities of USD 430 million in 2024 and USD 175 million in 2025, which Fitch expects GEB to refinance successfully through a mix of bank loans and capital market resources.

It has been a heavy macro week, which we will get to momentarily, but tomorrow (yes Saturday) DANE will be publishing the CPI data for January and it is expected to climb once again to 13.30%, from 13.12% a month ago. That will be the highest reading since 1999 – look on the bright side, in March 1999 interest rates were at 23%!

Export data was once again disappointing and propped up like a drunk on a bar by coal; not exactly the most popular product to be shipping all over the world. Exports for December totaled US$4.498bn – below the consensus reading of US$4.56bn and also that of November, there was also a 1% decline YoY in FOB terms. Coal rose 27% and contributed a 5.3% increase to the basket, on the flip side oil fell 15.7%. The only honorable mentions go to Metal Manufacturing (+38.9%) & Fruit & Vegetables (+32.3%). In tonnage terms it was even worse with a total decline of 14.5% with Coffee (-6.9%), Oil (-15.7%) & also Coal (-16.6%) all in the red.

The latest unemployment data for December was a reality check with Urban Unemployment at 10.8% (est 9.6%) rising from 9.1% in November, likewise Total Unemployment 10.3% – also rising from 9.5% the previous month. The total number of people working 22.46 million versus 21.49 million 12 months before, the month on month number was down just 18,000 with Agriculture and Vehicle related sectors the weakest performers.

Moving to January and Davivienda PMI was 48.5, whilst anything below 50 represents an economy that is contracting. We have already seen negative numbers in both November (47.3) & July (49.5) but they weren’t consolidated, so we will need to see February. That said Bancolombia in their weekly consumer report continues to see YoY declines during January.

I’ve spent the week watching the Peso quite carefully and unquestionably it seems to be far more correlated, at this juncture to the dollar (DXY) than oil. The week thus far has seen oil slip back 6% along with Ecopetrol whilst both the Peso and DXY were more or less unchanged.

Please find below the LinkedIn Video :

https://www.linkedin.com/posts/rupert-stebbings-927b6316a_colombia-economy-dane-activity-7027223016770043905-e5IU?utm_source=share&utm_medium=member_desktop

Have a wonderful weekend.

Roops

The Minister of Finance, José Antonio Ocampo, spoke out in support of the decision made by the Ecopetrol Board of Directors assembly following Carlos Gustavo Cano’s departure from that position.

Ocampo emphasized that in order to enhance “Colombia’s largest corporation,” the national government, which holds more than 88% of Ecopetrol, elected new Board members with the highest levels of expertise. “I support the election of Saúl Kattan as Chairman of Ecopetrol’s Board of Directors. His professionalism ensures that the oil company moves towards a responsible transition that will allow the company’s economic growth and the country’s fiscal stability,” the Minister said in a tweet.

Confusion

What was the chronology of these odd events? Concerning Carlos Cano’s appointment, replaced not even 24 hours later, José Antonio Ocampo explained that “yesterday a decision was prematurely announced and today it was announced what had been decided in that board, and furthermore, it must be remembered that the board is chaired by someone chosen by the government of the day”. In other words, the board’s meeting was still in progress when the news on Carlos Cano was made.

The minister stated that after selecting a new board of directors for Ecopetrol on Monday, October 24, the assembly convened on Thursday, October 27 and Friday, October 28 to conduct its first meeting. Ocampo added that Cano was not held in low regard and that as his appointment had not yet been confirmed, he had not actually lost his position.

But according to Reuters, who cited two people with knowledge of the negotiations, Colombia’s President Gustavo Petro opposed the nomination of Cano, which led to its revocation. Something that Carlos Cano also denounced himself in a letter published in Semana. “I regret to inform you that when this decision of the Board was made public, President Petro raised his voice of protest and disapproval, and, through several of his immediate collaborators, ordered the members of the board who are close to him, and also those who are not, to advance in this morning’s session my dismissal as president of the board after 24 hours of my appointment as such,” said Cano’s message.

“When this action was submitted to the board, in a divided vote, the decision was reached, induced by the president to remove me from that position, without any reason other than my proven independence from the government.”

The right decision?

What motivated the board of directors – or President Petro – to change its mind so abruptly in favor of the new Chairman Saúl Kattan? According to President Petro, who worked with him while he was the mayor of Bogotá and clearly steered the appointment, Kattan has reportedly enhanced the value of businesses like Grupo Energía Bogotá and ETB (Empresa de Telecomunicaciones de Bogotá) when he managed them. “The rights of minority shareholders shall always be respected. The guideline of the president of the republic for the action of his representatives in the new board of directors is to increase the value of Ecopetrol,” commented the President on its social media.

1. Ecopetrol configura como cualquier otra empresa su junta directiva de acuerdo a la participación accionaria, la mayoría de acciones es del Estado

2. La nueva junta directiva está conformada por personas que ya han aumentado el valor de empresas como EEB y ETB.

— Gustavo Petro (@petrogustavo) October 28, 2022

By appointing a familiar face as head of the Board of Directors of Ecopetrol, could it be that Gustavo Petro, who is openly anti-oil, is trying to manipulate the decisions made in the state oil company? When the newly elected President visited the company’s facilities in Meta in August, he claimed that “clean energy,” which he considers to be “affordable” and does not harm the environment, will be the state-owned oil company’s destiny in the following decades. Petro pointed out that the country’s energy portfolio must be diversified, and renewable energy production must be increased. Only the upcoming weeks can reveal if this is Petro’s goal in appointing Saúl Kattan.

In all cases, this reverse action, according to Citigroup, “sends the wrong message and challenges the board of directors’ independence, which may justify investors risk aversion that has translated into an implied equity risk for Ecopetrol.”

New board members

A few days before after Carlos Cano’s replacement, Ecopetrol had already announced significant changes in its Board of Directors. During an extraordinary general shareholder’s meeting held on October 24, the petroleum company appointed as non-independent representatives Mónica de Greiff Lindo, the only woman nominated by President Gustavo Petro and the first female representative at the table in the company’s history, and Gonzalo Hernández Jiménez, an economist from Universidad Javeriana, with a master’s degree and doctorate in economics from the University of Massachusetts, Amherst.

Mónica de Greiff Lindo is a lawyer with a specialization in administrative law, holds a doctorate from the Universidad del Rosario, and is considered, according to Colombian media, close to Petro and his administration, which could reinforce the President’s control over the company. Gonzalo Hernández Jiménez was also appointed by Petro’s administration.

As an economist from Colombia’s Universidad de Los Andes and a financial researcher, Saúl Kattan holds expertise in business negotiations, productivity increases, and strategic planning. He has worked in both the public and private sectors.

Besides Carlos Cano and Saúl Kattan, Ecopetrol also added five new persons as independent representatives, who are Gabriel Mauricio Cabrera, director of the firm Cabrera & Bedoya, Investment Bankers, Sandra Ospina Arango, electrical engineer with a degree in mathematics and physics from Universidad del Valle, Luis Santiago Perdomo, business administrator of the Colegio de Estudios Superiores de Administración (CESA) , Esteban Piedrahíta Uribe, economist from Harvard University and rector of Universidad ICESI, and Sergio Restrepo Isaza, business administrator from Universidad EAFIT.

With the appointments of Gonzalo Hernández Jiménez, Gabriel Mauricio Cabrera, Mónica de Greiff, Saúl Kattan and Sandra Ospina, it means that a total of five affiliates to Gustavo Petro are now in the Board of Directors of Ecopetrol. This undeniably sends a message concerning the president’s strategy with the company, as part of the “Energy that Transforms” plan for 2040, focused on the development of renewable energies.

Finance Minister Ocampo was in Washington this week chatting to the IMF and World Bank, traveling with several other local officials. Topics on the agenda included tax reform which is seen as a weapon to close the current account deficit, expected by Ocampo to close 2022 at 5.6%, as well as sustainability and the intention to slowly green Colombia’s energy production.

Whilst in Washington, the IMF raised Colombia’s 2022 GDP estimate to 7.6% – from 6.3% in July. As per other overseas entities, this is by far the highest amongst the front-line countries.

Ocampo remained in the headlines all week with another speech once again nudging the Central Bank on interest rates – his theory being that a supply driven inflation problem will not be cured by exorbitant rates. The problem is that the local swaps traders are anticipating borrowing rates of 11.5% or even higher.

Rupert’s opinions & analysis as an independent expert contributor are his own and not necessarily those of Finance Colombia or the BVC.

Central Bank Head Villar for his part stated that the weak Peso may force rates higher as inflation continues to be imported – he also became the latest authority figure to rule out capital controls.

Going back to the IMF, this week they also warned Latam countries against lowering rates too quickly before inflation was truly beaten.

At the beginning of the week there was disappointing, if somewhat predictable news on the consumer confidence front. Fedesarrollo reported a September number of -11.5% versus August -2.4% and a consensus estimate of -3.2%. IT’s easy to be smart after the event but given the current economic uncertainty and forthcoming tax reform, it is hardly a shock.

Over the weekend both GEB and EPM signed up to the national pact to lower energy prices and by Wednesday the ministry was reporting that no less than 80 companies in the sector had signed up and that via number or renegotiations of bilateral agreements, end users could expect to save $1.5 billion COP ($330 million USD) in 2023.

Later today we have the real sector data for August – there will be YoY gains still, but at a more modest rhythm.

Please find below the video report from LinkedIn:

https://www.linkedin.com/posts/rupert-stebbings-927b6316a_what-jumps-out-up-washington-way-overall-activity-6986660814699036672-Rc2S?utm_source=share&utm_medium=member_desktop

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That is about it for today – remember these are just themes that jump out at me – please refer to your local analyst, economist, salesperson or soothsayer for more details.

My regards to all,

Roops

Aside from that, the tax reform was again being subjected to forensic accounting with various sectors discussing why it shouldn’t be them that pays the bill…but the other guys. If there has been a constant in Colombia since the tax reform first saw the light of day in August, it is that many people are discussing why they shouldn’t be taxed more, but no one seems to be offering feasible alternatives. Colombia after all is a country that has to increase its revenues in order to move forward.

Finance Minister Ocampo followed Public Credit Director Acosta by stating that Colombia neither needs nor will impose capital controls. Central bank head Villar also stated that they simply don’t work. This after Thursday President Petro made mention of taxing hot money—the horse has bolted but hopefully this reassurance will help. The Peso closed Friday at $4622 – again close to record lows despite the pop in oil prices, will be a focus this week.

On energy and inflation, we have seen GEB join EPM who formally pledged to reduce energy prices by up to 8.7%, as part of a national pact to reduce costs in the sector.

Today we have the Consumer Confidence data from Fedesarrollo for September. Last month we saw it improve to -2.4%, this time a decline to -3.2% is expected.

On Friday from DANE comes the real sector data for August, modest YoY increases in both Retail and Industrial sectors are expected.  Also on Friday we will have the latest Central bank survey.

See link to video summary below (LinkedIn):

https://www.linkedin.com/posts/rupert-stebbings-927b6316a_what-jumps-out-the-week-ahead-the-weekend-activity-6985209517927972864-waZn?utm_source=share&utm_medium=member_desktop

That is about it for today, remember these are just themes that jump out at me – please refer to your local analyst, economist, salesperson or soothsayer for more details.

My regards to all,

Roops

________________________________________

That is about it for today – remember these are just themes that jump out at me – please refer to your local analyst, economist, salesperson, or soothsayer for more details.

My regards to all,

Roops