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EEB Suspended as Mayor-Elect Denies Triggering Bogota Tumble

Colombia suspended trading of Empresa de Energia de Bogota SA as shares plunged 17 percent over three days after Gustavo Petro, mayor-elect of the country’s capital, said he would seek to merge the electricity company with other city-controlled utilities.

EEB, as the country’s second-biggest electricity distributor is known, fell 3.7 percent to 1,050 pesos at 10:57 a.m. in Bogota before trading was halted. Shares posted their biggest three-day tumble since 2009 after Petro questioned the company’s investments in Peru and said in a Dec. 2 interview with El Tiempo newspaper that he plans to merge EEB with companies operating in telecommunications, sewage and water.

Petro denied in a posting on Twitter that his comments, which included his plans to use the “surplus” of EEB to help cover the “deficits” of the city’s sewage and water company, caused the share plunge, blaming speculators, who he said were looking to drive down the price.

The drop is the result of “speculative efforts to buy at the lowest possible price,” Petro said on Twitter today. “No one should expect Mayor Petro to subject the public interest to the private, even if it costs me my life,” he said in another post.

Colombia’s securities regulator suspended trading of the shares for three days “as a preventive measure to protect investors,” according to an e-mailed statement.

‘Learning Curve’

The trading halt may be a sign of the “steep learning curve” faced by Petro, a former member of the Marxist-leaning M-19 guerrilla movement and an ex-senator, as he prepares to take over leadership of Colombia’s capital, said Heather Berkman, a political risk analyst at Eurasia Group in New York.

“He doesn’t seem to have a real plan and doesn’t seem to be connecting the dots that his comments are a factor in the share price,” Berkman said.

Petro is set to take office next month after he won with 32 percent support in an Oct. 30 vote. On Twitter today, he said he had already laid out his merger plan during campaigning.

Investors give more weight to the words of a mayor-elect than a campaigning candidate, said Camilo Rubiano, an analyst at Afin SA in Bogota.

“His comments now are taking people by surprise because there was no clear leader during the campaign,” Rubiano said.

Petro said in the Dec. 2 interview with El Tiempo that he plans to merge EEB with the city-controlled companies Empresa de Acueducto de Bogota SA and Empresa de Telecomunicaciones de Bogota SA. He added that he plans to use EEB’s “surplus” of funds to reduce costs for water service, the daily reported.

Peru, Guatemala

EEB plans to use 772 billion pesos ($410 million) raised in a share sale that ended Oct. 27 to help fund an expansion of existing operations in Peru and Guatemala, Monica De Greiff, the company’s president, told reporters on Oct. 7. EEB assets in Peru include natural gas distribution concessions in Lima and other regions.

De Greiff didn’t immediately respond to a request for comment. A Petro spokeswoman didn’t immediately respond to calls for comment.

Petro’s Progressives party holds eight of 45 seats in the city council and he would have to negotiate with other parties for passage of the merger plan, Berkman said.

“The council seems pretty fragmented and it’s going to be a hard sell especially since this was one of the better-run utilities,” Berkman said. “From an economic standpoint, it doesn’t necessarily make sense to use profits of one of the public companies to prop up another.”

City Council

City council President Maria Victoria Vargas said she has seen no concrete proposal, which would probably require at least a simple majority of votes for approval in the council.

“It’s just an idea at this point that will eventually need to be evaluated by the council, including from a legal standpoint,” Vargas said by phone from Bogota. “I don’t know if he has a plan drawn up already. We’ll have to wait and see.”

Vargas said her Colombian Liberal Party, along with members of the Radical Change, Alternative Democratic Pole and Green parties, are potential allies in the council that could help Petro push through the initiative.

Petro said on Twitter today that a merger would respect minority shareholders and conform to the law, a response to a letter by acting mayor Clara Lopez published by local media today that alleged the share decline may have violated norms protecting minority shareholders. Petro in turn accused Lopez of trying to privatize the company without a public debate, without giving further details.

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