Brookfield buys Isagen controlling stake amid protests

Philippi, Prietocarrizosa & Uría (Colombia) is advising Canada’s Brookfield Asset Management on its controversial near-US$2 billion acquisition of Colombian state power generator Isagen, the biggest privatisation to take place in Colombia in a decade.

Brookfield Colombia Investment bid US$1.99 billion for the Colombian government’s 57.6 per cent controlling stake in Isagen at an auction that took place at Bogotá’s stock exchange on 13 January. The Canadian investment fund will pay the purchase price in cash on 26 January, when the transaction is expected to close. It also agreed to make two further tender offers to minority shareholders.

The government hired investment banks for the share sale, which in turn hired Gómez-Pinzón Zuleta Abogados. The firm did not identify the banks.

Opponents fear the deal will cause an increase in energy prices and mass lay-offs. Brookfield bid the minimum amount set by Colombia’s government, but critics say the price was too low and have criticised the auction for only attracting one bidder.

Upset from the sale threatens to cause major political fallout that could derail President Juan Manuel Santos’ coalition government. Colombia’s Liberal Party threatened to leave the reigning coalition over the sell-off earlier this month – if it follows through on the threat Santos will lose his majority in both the Senate and Chamber of Representatives. There is also considerable public opposition against the privatisation; according to TV network Noticias Uno, 95 per cent of Colombians oppose the sale.

At the start of January – during a Congressional recess – Colombia’s Finance Ministry announced Brookfield and Chilean utilities company Colbún would bid for the company, but Colbún withdrew from the auction two days before it took place. It cited new deadlines and a 21.5 per cent increase in the minimum price set by the authorities as its reason for pulling out. The company recently splashed out in Peru, when it bought Fenix Power Perú in a US$786 million deal, its first acquisition outside of Chile.

Medellín-based Isagen is Colombia’s third-largest energy company. It has a 16 per cent share of the Colombian national grid and runs five hydroelectric plants. Brookfield counsel PPU declined to comment on the sale before closing. Latin Lawyer could not determine whether Colombia’s government used external counsel before publication.

Colombia’s government first mooted the idea of selling Isagen in 2013. The idea faced steep opposition from the start and the project has been mired by legal challenges. In May 2015, Colombia suspended its auction amid claims the US$2 billion price tag was too small. The government had already postponed the sale a year earlier to try and attract more bidders.

Funds raised from the sale will be spent on Colombia’s fourth-generation highway expansion plan, known as 4G, which requires around US$25 billion of investment.

Counsel to Brookfield Asset Management

Philippi, Prietocarrizosa & Uría (Colombia)

Partners Juan Carlos Rocha, Héctor Hernández, Sandra Manrique and Juan Fernando Gaviria and associates Paola Vasquez, Luz Maria Mercado, Juan Camilo Segura and Mauricio Nieto

Counsel to investment banks (acting on behalf of the Colombian government)

Gómez-Pinzón Zuleta Abogados

Partners Jaime Robledo Vásquez, Eduardo Zuleta, José Luis Suárez, Mauricio Piñeros, Daniel Londoño, Mauricio Jaramillo and Alejandro Linares Cantillo* and associates Rafael Rincón Ordóñez, Paola Ordóñez Arias, Juan Pablo Caicedo De Castro, Anabella Vegas*, and Pablo Carrizosa

*Since left the firm

This article was updated on 15 February to include counsel details from Gómez-Pinzón Zuleta Abogados​


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