Cablegate: Ecogas Privatization -- A Dry Run for Ecopetrol?

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DE RUEHBO #9454 2861908
ZNR UUUUU ZZH
R 131908Z OCT 06
FM AMEMBASSY BOGOTA
TO RUEHC/SECSTATE WASHDC 9794
INFO RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS BOGOTA 009454

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SIPDIS

E.O. 12958: N/A
TAGS: ENRG EMIN EINV CO
SUBJECT: ECOGAS PRIVATIZATION -- A DRY RUN FOR ECOPETROL?

REF: BOGOTA 7497

1. A pension fund consortium bidding for the ownership of
Ecogas, Colombia's state-owned natural gas transportation
company, failed to meet the minimum required purchase price
for the company. Under Colombia's constitution, the failure
of the "solidarity sector" (pension funds or unions) to meet
the minimum price allows the GOC to view offers from private
domestic and international bidders, which it will do in a
second round of bidding set to take place at the end of
November.

2. Ecogas owns, maintains and operates approximately 3644
kilometers of pipeline, representing 70 percent of Colombia's
gas pipeline network. In 2003, President Uribe signed a law
to privatize ECOGAS with the goal of making the company more
productive and efficient.

3. Article 60 of Colombia's constitution requires that
pension funds and unions be given first opportunity to bid
during the privatization of state-held assets. In the case
of Ecogas, six large Colombian pension funds offered a
consortium bid of USD 823 million. As revealed in a public
ceremony, the offer fell short of the GOC's required minimum
bid. The failure of the Colombian pension funds to come up
with an acceptable price allows the GOC to open the bidding
to private domestic and foreign investors. This next round of
bidding will be evaluated on November 29th.

4. Comment- Although the GOC's official asking price for
Ecogas remains under seal, GOC public comments revealed the
pension fund consortium fell short of the required minimum
bid by nearly USD 80 million. Subsequent bidding by the
private sector (the pension funds could also bid again, if
they choose) should result in offers that easily exceed the
required minimum. While the details of the Ecopetrol sale
(Reftel) have not been determined by Congress, a similar
bidding process will likely be used for the partial
privatization of Ecopetrol to comply with the Article 60
requirement to offer first bidding rights to union or pension
fund bidders. End Comment.
WOOD

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