Guerrilla Retreat Leads to IPO as Colombia’s Condor Seeks Highway Funding

Construcciones El Condor SA, a Medellin-based construction company, aims to raise as much as 200 billion pesos ($111 million) in an initial public offering to help finance Bogota’s airport expansion and jungle highway projects in areas once overrun by guerrillas.

Proceeds from a sale in the first quarter will help fund a backlog of 1.3 trillion pesos in projects, including the airport, Luz Maria Correa, the company’s president, said in an interview. Condor will bid on new contracts as Colombia works to improve roads and bridges to take full advantage of a U.S. free- trade accord approved by lawmakers in October, she said.

“Colombia’s infrastructure is way behind and the shipping routes must be improved ahead of the free-trade agreement,” Correa said yesterday in an interview in Bogota.

The South American country will need 99 trillion pesos of infrastructure development by 2021, according to a September report by the Transportation Ministry. A surge in foreign direct investment is helping spark the fastest economic growth in five years as new areas of the countryside open up to oil and mining exploration after a decade of military victories over guerrillas.

Condor is one of at least five companies that have said they may offer shares this year in Bogota. Companies issued more than $7 billion in a record nine Colombian share offerings last year, according to data compiled by Bloomberg.

The benchmark IGBC Index of stocks fell 0.4 percent to 13,597.21 today, trimming its gain this year to 7.4 percent. The measure dropped 18 percent last year.

Infrastructure Surge

Condor shares will give investors exposure to Colombia’s surge in building, said Rupert Stebbings, a director for Celfin Capital in Medellin. Shares of Grupo Odinsa SA, which joined with Condor in 2010 to win a 1.1 trillion peso bid to pave a highway that runs to the borders of Panama and Venezuela, have risen 10 percent in the past 12 months, compared with a 10 percent drop in the country’s benchmark stock index. Condor is a minority shareholder in Odinsa.

“Construction in this country will be a driver of growth for the next five to 10 years,” Stebbings said. “Infrastructure are the big elephant projects that could last 10 to 20 years.”

Condor’s profit in the first nine months of 2011 fell 33 percent from a year ago to 18.3 billion pesos as operating revenue fell 13 percent to 150 billion pesos, according to e- mailed results from the company. Correa said total 2011 profit and revenue will grow from the year before as highway projects bolster fourth-quarter earnings.

Darien Gap

Condor is part Vias de las Americas SAS, a consortium that also includes Odinsa (ODINSA) and Valorcon SA, which won in 2010 the contract for the Transversal de Las Americas highway that would improve road networks between Colombia’s borders with Panama and Venezuela. Correa said the company seeks to build a second phase of that project which, if approved by the government, would complete the Panamerican highway network that stretches from Alaska to Chile by building a road through the Darien gap along the jungle-laden Panama border.

The company’s current projects include road work in the southern Colombian regions of Putumayo and Narino and logistics at a coal mine in northern Colombia. Condor also plans to bid on future projects for a hydroelectric dam and a $350 million water treatment plant near Medellin, Correa said.

Politics, bureaucratic delays and heavy rains are the biggest risk factors for Condor, said Jorge Zuniga, an analyst at Interbolsa SA, Colombia’s biggest brokerage.

Halted Construction

“Floods, particularly in northern Colombia, halted construction of many projects last year and now companies are playing catch-up,” Zuniga said by phone from Medellin.

Colombia’s new Environment Minister Frank Pearl suspended on Jan. 12 work on a tunnel of Condor’s near Medellin for 90 days to review its environmental impact study.

The Transversal de Las Americas, which faced an attorney general’s investigation after the contract was awarded in 2010, has yet to get off the ground and remains in the design phase, Correa said.

Colombian construction company Constructora Conconcreto SA dropped 18 percent last year as moratoriums on public bids during the electoral period and permit delays cut into revenue, Zuniga said.

President Juan Manuel Santos created last November the National Infrastructure Agency to streamline public bidding processes for infrastructure projects. Zuniga said Condor is positioned to benefit from expedited public bids and demand for improved shipping routes.

Economic Growth

Bancolombia (BCOLO) SA’s investment banking unit will help manage the Condor share offering.

Colombia’s economy expanded 7.7 percent in the third quarter, the fastest pace since 2006, driven by a surge of spending on roads, energy and mining infrastructure projects.

Bancolombia, Colombia’s biggest bank, is offering as much as $883 million worth of shares in a sale that ends Jan. 27. Ecopetrol SA (ECOPETL), Carvajal SA and Contourglobal Latam SA are among companies that have expressed interest in selling shares in Colombia in 2012.

To contact the reporter on this story: Blake Schmidt in Bogota at bschmidt16@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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