Colombia Seeks at Least $2.4 Billion for Isagen Stake

Colombia’s government will auction its majority stake in electricity company Isagen SA to raise money for infrastructure projects, Finance Minister Mauricio Cardenas said.

Colombia in the auction to be held in one month will offer shares at a minimum of 2,850 pesos each, which would value the government’s stake at 4.5 trillion pesos ($2.4 billion), Cardenas told reporters in Bogota today. The government wants to raise 5 trillion pesos or more for its 57.66 percent stake in the Medellin-based company, he said.

After the first auction, which will last 60 days and will be open to a restricted group of bidders including company employees, the government will hold a second round of bidding where it expects to achieve a higher price, Cardenas said. He didn’t say when the second stage will be held.

“Naturally, we hope that in the second round when we turn to the market, there’ll be competition that increases the final price above this base of 4.5 trillion pesos,” Cardenas said.

The new operator of Isgaen must have “ample experience in electricity generation, and a lot of financial muscle that allows it to contribute to the growth of the company, improve its operation and offer lower energy costs to Colombians,” the Finance Ministry said in a statement.

‘Very Surprised’

Isagen shares fell 0.9 percent to 2,720 pesos in Bogota trading today. The minimum price in the first round would be greater than the record high of 2,760 pesos on July 25.

“We’re very surprised that they’re talking of 2,850 pesos per share, the shares have never reached that high” Jaime Pedroza, an analyst at Credicorp Capital’s Colombia unit in Bogota, said in a telephone interview. “I don’t know who’d be interested in buying at that price, which could mean that already have an interested buyer lined up.”

The sale will save Colombia 300 billion pesos per year in debt service costs over the next decade, the Finance Ministry said in its statement. In its 2013 financing plan, the government said it would raise 3 trillion pesos from “other” sources, which includes privatizations.

Colombia won’t spend any of the proceeds from the sale before August 2014, Cardenas said. The government isn’t considering a sale of any part of its stake in oil company Ecopetrol SA, he added.

Before it's here, it's on the Bloomberg Terminal.