Colombian hydropower producer Isagen SA ESP (ISAGEN) fell a record amount after the government said it postponed the sale of a majority stake in the company following requests from would-be bidders for a delay.
The shares fell 14 percent to 2,770 pesos in Bogota trading after Finance Minister Mauricio Cardenas said the government would wait as long as a year to hold the auction. The government owns a 57.6 percent stake in Isagen, which operates the country’s biggest hydropower plant.
“This creates a lot more uncertainty about how the process will end,” said Juan David Ballen, an analyst at Alianza Valores in Bogota. “It’s unclear whether those who are interested in participating in the auction will stay or leave, because it’s a very long time.”
The government of President Juan Manuel Santos had earmarked funds from the Isagen sale to help fund his $25 billion highway-building program, known as “fourth generation,” or 4G. The postponement of the sale, which Colombia hoped would fetch at least 5 trillion pesos ($2.7 billion), should fuel speculation over how the government will fund the new roads, said Daniel Velandia, head analyst at Credicorp’s Colombia unit.
“This generates uncertainty over how they’re going to pay for the 4G projects,” Velandia said in a phone interview. “Wherever you look, there’s a need for money, and this raises a lot of questions.”
Traders may speculate that the government will consider selling part of its majority stake in oil producer Ecopetrol SA, or raise money via multilateral loans, Velandia said. The peso had rallied on the expectation that the Isagen sale would bring in dollars, so the suspension will put pressure on the currency to weaken, Velandia said.
The peso has strengthened 2.2 percent over the last three months to 1,876.25 per U.S. dollar, the biggest gain among seven major Latin American currencies tracked by Bloomberg.
Companies including GDF Suez (GSZ) and China Huadian Corp. had expressed interest in buying the Colombian government’s stake.
Empresa de Energia de Bogota SA ESP remains interested in bidding for Isagen, Chief Executive Officer Sandra Fonseca said in an interview in Bogota today. The delay will give EEB more time to deal with demands from regulators, she said.
The government, which had planned to auction its stake in the electricity generator on Aug. 22, said it will announce a new timetable “soon.” The start of operations at the company’s Sogamoso dam in central Colombia before year-end will reduce investor uncertainty and help maximize the number of interested bidders, the Finance Ministry said in an e-mailed statement.