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Ecopetrol plans to raise $2.82 billion in share sale
By Guillermo Parra-Bernal
Bloomberg
Sao Paulo
Petroleumworld.com 08 16 07
Colombia's Empresa Colombiana de Petroleos SA, taking advantage of soaring demand for energy- related investments, aims to raise as much as 5.72 trillion pesos ($2.82 billion) in an initial share offering that may become the country's biggest ever.Bogota-based Ecopetrol will offer 4.09 billion shares to Colombian pension funds, workers and citizens at 1,400 pesos each in two phases that may be finished within the next six months. The first offering will start Aug. 27 and concludes Sept. 25. The company's $25.47 billion market value makes it Colombia's largest, according to Bloomberg data.
``We are offering local investors the chance to invest in the country's development in an asset that's in vogue around the world,'' said Javier Gutierrez, Ecopetrol's chief executive, in a phone interview from Bogota. ``Energy-related assets have wide room for the upside.''
President Alvaro Uribe's government has been counting on selling stakes in state-owned companies such as Interconexion Electrica SA and Isagen SA to investors to promote the local capital markets and raise cash to rein in the nation's budget deficit. By selling a stake in Ecopetrol, the government would finance investment in oil production increases and exploration, to keep Colombia self-sufficient in petroleum.
Additional Sales
A second portion of the sale, also aimed at resident and non-resident Colombian citizens, may happen after the stock is listed in November, or about six months from now, he said. A sale in overseas markets in which foreign, non-resident investors could participate is scheduled to take place within a year, Gutierrez, a former president of Medellin-based Interconexion, said.
When the process is finished next year, about 20 percent of the company will belong to investors, Gutierrez said. JPMorgan Chase & Co. and Credit Suisse Group are handling the IPO. Bancolombia SA's investment-banking unit and Merrill Lynch & Co. are also advising on the transaction.
The company may also seek to raise funds for expansion by selling bonds or borrowing from banks, Gutierrez said. The proceeds from the IPO are ``enough to meet Ecopetrol's capital needs for the moment,'' Gutierrez said.
Colombia, Latin America's fifth-largest oil exporter with 1.5 billion barrels of proven oil reserves, is stepping up efforts to develop new wells and expand production capacity after forecasting it would become a net importer by 2011.
Ecopetrol, which in 2005 produced about 60 percent of Colombia's daily output of 526,000 barrels, and the government will invest about $2.5 billion annually over the next five years.
Soaring Volume
The offer takes place in a market where daily trading volumes have risen 25-fold to $50 million a day since 2002 because of a strengthening currency and growing interest from foreign investors. Still, the size of the IPO may be too large for a market that's just beginning to attract retail investors and where the central bank is raising borrowing costs to contain inflation.
``It will be a litmus test for the company and the government,'' said Marcela Giraldo, a senior stocks analyst with Corredores Asociados SA in Bogota. ``The market has been slowly preparing for this transaction. Our feeling is that the market wants the issue.''
The Colombian General Stock Index has shed 4 percent this year, after the central bank lifted the benchmark overnight interest rate seven times, to a six-year high of 9.25 percent. The IGBC index fell for a fifth day, declining 0.2 percent to 10,474.83 -- the lowest since mid-May.
`Confident'
Corredores' Giraldo, who expects Ecopetrol to offer a shares to international investors during the second half of 2008, said demand from investors is unlikely to dwindle because of turmoil in international financial markets triggered the U.S. housing slump.
``We are confident that local investors will categorize Ecopetrol within a group of the safest investments compared with other assets in the domestic and overseas markets,'' Gutierrez said.
To contact the reporter on this story: Guillermo Parra-Bernal in Sao Paulo at gparra@bloomberg.net
Bloomberg 15 08 07
Copyright© 2007 Bloomberg. All rights reserved.
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