Empresa de Energia de Bogota SA, or EEB, expects its net profit in 2010 to be similar to last year’s at close to 700 billion Colombian pesos ($376 million), thanks to dividends from the state-controlled power company’s stakes in different power and gas companies.
“We are forecasting very good revenues and lower debt payments because of the (peso) re-evaluation,” Chief Executive Monica De Greiff told Dow Jones Newswires in an interview. “Additionally, our recent investment in gas transportation will start generating revenues,” she added.
The company made net profit of COP723 billion in 2009, and COP219 billion in 2008.
EEB, which is controlled by the Bogota city council, holds majority stakes in power-generation company Emgesa and electricity-distribution company Codensa, although both companies are operated by Spain’s Endesa. EEB also holds a minority stake in the local unit of Gas Natural SDG SA (GAS.MC), and fully owns natural-gas network Transportadora de Gas del Interior SA, or TGI.
The firm’s net results are important because the company generally distributes most of its profits in dividends, as its principal shareholder, the city of Bogota, “always needs a lot of cash for its social programs,” De Greiff said. EEB is also paying interest on its $750 million in international bonds sold in 2007.
The city council’s need for cash benefits minority investors who hold some of the shares trading on the local stock exchange.
EEB’s dividend yield is about 2.9%, which is high for Colombia, said Johanna Castro, a market analyst with local brokerage Corredores Asociados. Castro recommends selling shares of EEB as prices are already expensive after rising 63% since late October, when Endesa sold an EEB stake on the stock exchange, boosting the shares’ liquidity.
The power company is currently investing in expansion projects for about $1 billion in gas pipelines in Colombia and Peru, as well as an electricity transmission grid in Guatemala.
The gas network in Peru requires a $285 million investment and the grid in Guatemala needs $374 million. In both cases, EEB will use its own cash flow and seek local financing with local banks, multilateral lenders and in capital markets.
The first phase of the Colombian gas project, which involves the expansion of TGI, will be ready in the second half of this year and the second phase will be ready in the first half of 2011. EEB is seeking to raise $400 million in an equity offering in the second half of 2010 that would bring a new partner on board at TGI. The company is holding a competitive process, and several international energy companies are interested, said Henry Navarro, EEB’s vice president for planning, during the same interview. He declined to name any of the prospective partners.
The winner will be the company that offers to take the smallest stake in TGI for $400 million. “We will seek more than just a ‘capitalist’ partner, a company that will bring know-how and value-added,” Navarro said.
EEB will also try to raise cash through the sale of its minority stakes in two other state-owned power firms–Interconexion Electrica SA (ISA.BO), or ISA, and Isagen SA. Together, the stakes are worth about $200 million at current market price, Navarro said.
“But we are in no rush to sell,” De Greiff added.
De Greiff said EEB will also seek more projects in Colombia, Central America, Chile and Brazil, and that the company is also evaluating expanding into the infrastructure and engineering businesses.
The Bogota city council controls 81.5% of EEB, while state oil company Ecopetrol SA owns 7.4%, and financial holding company Corporacion Financiera Colombiana SA has 3.8%. The remainder trades on the Colombian Stock Exchange. (Inti Landauro / Dow Jones)