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.

Key Rating Drivers

Low Business Risk Profile: ISA’s ratings reflect a low business risk profile, characteristic of the power transmission sector, which contributes approximately 80% of the company’s consolidated EBITDA. The remaining EBITDA is primarily derived from road concessions in Colombia and Chile, which include mechanisms to ensure minimum income or extend concession periods if traffic is low. The telecommunications segment is expected to contribute less than 2% to ISA’s consolidated EBITDA.​

Parent-Subsidiary Linkage: Fitch rates ISA two notches above its parent company, Ecopetrol (rated ‘BB+’ with a negative outlook), due to ISA’s strong business and financial profile. Regulatory ring-fencing mechanisms, material minority shareholders, and a track record of strong governance practices limit Ecopetrol’s capacity to extract value from ISA. ISA’s funding and cash management policies are managed independently of Ecopetrol, and any changes in corporate governance, business, or financial strategy could pressure ISA’s ratings, particularly if there is a structural increase in its dividend payout ratio.​

Investments and Leverage: Fitch anticipates that ISA’s EBITDA leverage will peak at 4.5x during 2026, up from 3.7x in 2024, with EBITDA interest coverage around 4.0x over the rating horizon. The company’s free cash flow is expected to remain negative during 2025-2027 due to its capital expenditure program and a dividend payout ratio of 50%. ISA’s committed grid-focused investment program is projected to reach $22.2 trillion COP from 2025-2028, with approximately 83% concentrated in regulated transmission grids and 14% allocated to road concessions. Geographically, Brazil accounts for 52% of these investments, followed by Chile (18%), Colombia (15%), Peru (11%), and Panama (4%).​

Geographic Diversification: ISA’s cash flow generation is diversified across Latin America. Fitch estimates that over the rating horizon, approximately 38% of the company’s consolidated EBITDA will come from Brazil, 27% from Colombia, 15% from Chile, and 20% from Peru. Less than 1% of ISA’s consolidated cash generation is expected from Panama and Bolivia.​

Regulatory Risk: ISA’s diversification effectively hedges its exposure to regulatory risk, as most of its revenues are derived from regulated transmission grids. An upcoming regulatory reset in Colombia for the transmission business is expected during 2025-2026. While there is limited visibility on the final tariff scheme, Fitch believes the outcome will not significantly pressure ISA’s financial metrics, as the reset is included in the company’s consolidated revenues.​

Applicable Country Ceiling: ISA’s applicable country ceiling is that of Peru, rated ‘A-‘, as the cash flow generated by Peruvian subsidiaries covers more than 4.0x the company’s hard currency gross interest expense in Fitch’s forecast horizon. Therefore, a lowering of Peru’s country ceiling could affect ISA’s ratings, particularly in a multiple-notch downgrade scenario.​

Peer Analysis

ISA’s credit profile is comparable to regional peers such as Transelec S.A. (BBB/Stable), Consorcio Transmantaro S.A. (CTM; BBB/Stable), Sociedad de Transmision Austral S.A. (STA; BBB/Stable), Empresa de Transmision Electrica, S.A. (ETESA; B/Stable), Alupar Investimento S.A. (BB+/Stable), and Transmissora Alianca de Energia Eletrica S.A. (Taesa; BB+/Stable). All these companies benefit from a low business risk profile and predictable cash flow. ISA’s higher rating compared to Taesa, Alupar, and ETESA is mainly due to its geographic diversification.

ISA operates in Colombia, Brazil, Chile, and Peru, while Taesa’s and Alupar’s operations are concentrated in Brazil, and their ratings are negatively affected by Brazil’s ‘BB+’ country ceiling. ETESA’s ratings reflect delays in coupon payments, lowering the Government Related Entity (GRE) score to 15 from 50 with Panama (BB+/Stable). ISA has a similar scale of operations and EBITDA generation compared to Redeia Corporacion S.A. (A-/Stable), the sole transmission system operator and electricity transmission network owner in Spain.​

Rating Sensitivities

Negative Rating Action: Factors that could lead to a downgrade include a sustained increase in leverage above 4.5x on a consolidated or non-consolidated basis due to deteriorating cash generation or increased debt levels beyond Fitch’s base case scenario; regulatory changes that significantly pressure ISA’s cash flow; changes in the company’s business and financial strategy, particularly regarding dividend distribution practices and corporate governance; a negative rating action on Ecopetrol; or a multi-notch downgrade of Peru’s country ceiling.​

Positive Rating Action: Although unlikely in the short to medium term, a positive rating action may be considered if total consolidated leverage falls below 2.5x. The negative outlook could be revised to stable if Ecopetrol’s outlook is revised to stable from negative.​

Liquidity and Debt Structure

As of December 2024, ISA reported cash on hand exceeding $5.9 trillion COP, reflecting healthy internal cash flow generation, manageable debt amortizations, and increased access to local and international capital markets. Approximately 37% of this cash is restricted, primarily to cover contractual obligations in the road concession business. Cash on hand plus cash flow from operations is expected to cover ISA’s short-term debt by more than 1.25x, aligning with investment-grade companies. ISA’s long-term debt amortization schedule is spread until 2056, with manageable maturities at the holding company level for 2025.​

Issuer Profile

ISA is a Colombian holding company focused on energy transmission, road concessions, and telecommunications, with operations in six countries.

Photo credit: kentoshima1984 from Pixabay.