Ecopetrol scraps plans to issue shares to buy ISA

Colombia's state-controlled Ecopetrol has opted to seek a loan from an international bank to close its planned purchase of the government's stake in the country's electricity giant Interconexion Electrica (ISA) instead of issuing shares, taking advantage of the oil company's strong earnings amid rising crude prices.

Ecopetrol initially sought to finance the purchase of the government's 51.4pc stake in ISA via a sale of 8.5pc of Ecopetrol's shares, internal cash flow and new debt. Now, the company says it is not conditioning the purchase of ISA on the issuances of its shares as the favorable financial performance of the company allows it to close the transaction.

If the energy company does not issue shares to finance the transaction, it will mean that the government will still hold an 88.5pc stake in Ecopetrol.

Ecopetrol also said the exclusive agreement with the finance ministry to start the clock on negotiations over the terms and conditions of the transaction has been extended. The negotiation period was due to end on 30 June, but it has been extended until August 31.

Ecopetrol booked a profit of Colombian Ps3.09 trillion ($807mn) in the first quarter of 2021, because of strengthening oil prices, up from Ps132bn in the same period last year.

With today's announcement, Ecopetrol's shares jumped 8.25pc on the local stock exchange to Ps2,730 per share.

Ecopetrol's shares had fallen behind international oil peers ahead of the announced issuance of new shares, Wilson Tovar, head of research at brokerage Acciones y Valores, said.

For Ecopetrol, the acquisition will help dilute the company's carbon footprint and provide steady cash flow. ISA, which is valued at about $3.5bn, is Latin America's largest transmission company with 49,147km (30,539mi) of high-voltage lines, of which 12,000km are located in Colombia.

ISA also has 6,547km of roads under construction in 15 projects that will come into service over the next four years.

By Diana Delgado