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Ecopetrol obtains authorization to execute a loan agreement with local banks for one trillion pesos

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Ecopetrol S.A. (BVC: ECOPETROL; NYSE: EC), a leading energy company in Colombia, has received authorization from the Ministry of Finance and Public Credit (MHCP) to secure a loan of up to one trillion Colombian pesos (COP). The loan will be conducted with Banco de Bogotá (COP 642 billion), Banco de Occidente (COP 208 billion), and Banco Popular (COP 150 billion). The loan term is seven years, with a two-year grace period and repayment in ten equal semi-annual installments. The interest rate will be indexed to the IBR. This loan aligns with the company’s 2024 financing plan and will be used for non-investment expenses, including paying existing financial commitments. Ecopetrol highlights that the terms obtained demonstrate strong support from the financial sector.

Positive
  • Ecopetrol secured a significant loan authorization of up to one trillion Colombian pesos (COP).
  • The loan term is favorable with a seven-year duration, including a two-year grace period.
  • The interest rate is indexed to the IBR, potentially offering favorable financial terms.
  • The financial sector's confidence in Ecopetrol is evident from the loan agreement terms.
  • The loan supports Ecopetrol's 2024 financing plan and maintaining its gross debt/EBITDA targets.
Negative
  • The loan will be used for non-investment expenses, which may not contribute directly to growth.
  • Ecopetrol is incurring additional debt, potentially increasing financial liabilities.
  • Repayment of the loan will commence after two years, creating future financial obligations.

Ecopetrol's authorization to execute a loan agreement for 1 trillion Colombian pesos signifies a strategic move to manage short-term financial commitments, without directly boosting capital investment. The loan's seven-year term, with a two-year grace period, provides a structured repayment plan, potentially easing immediate financial stress.

Interest Rate Indexed to IBR: The fact that the interest rate is indexed to the IBR (Indicador Bancario de Referencia) ensures it is market-responsive. This can be beneficial in a stable or declining interest rate environment but may pose higher costs if rates rise.

From a financial health perspective, this loan aligns with Ecopetrol's 2024 financing plan and maintains its gross debt/EBITDA target, which indicates prudent financial management. However, using the funds for non-investment purposes, such as paying existing financial commitments, suggests a focus on liquidity over expansion.

For retail investors, this news highlights Ecopetrol's strong banking relationships and its capability to secure significant funding. Though not directly driving growth, maintaining financial stability through such loans can be a positive indicator of the company's risk management strategies.

Ecopetrol's recent loan authorization showcases the confidence local banks have in the company's future. This confidence is crucial, especially in a volatile market where access to capital can determine operational stability. Ecopetrol's role as a major player in Colombia's hydrocarbon production and its diversified operations in energy transmission and road concessions bolster its market position.

Implications for Market Perception: The loan supports operational continuity, which can positively affect market perception. Investors might view the ability to secure such a significant loan as a sign of financial health, potentially leading to positive sentiment in the short term.

However, allocating the loan for non-investment expenses rather than for growth could be seen as a conservative approach. While this may ensure immediate operational stability, it may not directly contribute to long-term revenue growth. Therefore, the market reaction could be mixed, balancing between stability and growth expectations.

Retail investors might consider the context in which this loan is taken. In a stable or improving economic environment, such financial maneuvers can be interpreted as strategic positioning for future opportunities.

BOGOTA, Colombia, June 17, 2024 /PRNewswire/ -- Ecopetrol S.A. (BVC: ECOPETROL; NYSE: EC) ("Ecopetrol" or the "Company") informs that, through Resolution 1671 of June 14, 2024, the Ministry of Finance and Public Credit ("MHCP") authorized Ecopetrol to execute a loan agreement for up to one trillion Colombian pesos (COP).

The loan is expected to be executed with Banco de Bogotá S.A. (COP 642 billion), Banco de Occidente S.A. (COP 208 billion) and Banco Popular S.A. (COP 150 billion), as lenders. The term of the loan is expected to be seven (7) years, with a grace period of two (2) years from the date of the first disbursement. The amortization is expected to be made in ten (10) equal semi-annual installments once the grace period is over and the interest rate is expected to be indexed to the IBR in the terms previously agreed with the banks. Aligned with the 2024 financing plan and maintaining the gross debt/EBITDA target for the year, the resources of this operation will be used for non-investment expenses, including the payment of existing financial commitments.

To obtain authorization for the loan, the Company complied with all the required internal procedures and approvals. The conditions obtained for this agreement ratify the support and confidence of the financial sector in the Ecopetrol Group's strategy.

Ecopetrol is the largest company in Colombia and one of the main integrated energy companies in the American continent, with more than 18,000 employees. In Colombia, it is responsible for more than 60% of the hydrocarbon production of most transportation, logistics, and hydrocarbon refining systems, and it holds leading positions in the petrochemicals and gas distribution segments. With the acquisition of 51.4% of ISA's shares, the company participates in energy transmission, the management of real-time systems (XM), and the Barranquilla - Cartagena coastal highway concession. At the international level, Ecopetrol has a stake in strategic basins in the American continent, with Drilling and Exploration operations in the United States (Permian basin and the Gulf of Mexico), Brazil, and Mexico, and, through ISA and its subsidiaries, Ecopetrol holds leading positions in the power transmission business in Brazil, Chile, Peru, and Bolivia, road concessions in Chile, and the telecommunications sector. This press release contains business prospect statements, operating and financial result estimates, and statements related to Ecopetrol's growth prospects. These are all projections and, as such, they are based solely on the expectations of the managers regarding the future of the company and their continued access to capital to finance the company's business plan. The realization of said estimates in the future depends on the behavior of market conditions, regulations, competition, and the performance of the Colombian economy and the industry, among other factors, and are consequently subject to change without prior notice.

This release contains statements that may be considered forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. All forward-looking statements, whether made in this release or in future filings or press releases, or orally, address matters that involve risks and uncertainties, including in respect of the Company's prospects for growth and its ongoing access to capital to fund the Company's business plan, among others. Consequently, changes in the following factors, among others, could cause actual results to differ materially from those included in the forward-looking statements: market prices of oil & gas, our exploration, and production activities, market conditions, applicable regulations, the exchange rate, the Company's competitiveness and the performance of Colombia's economy and industry, to mention a few. We do not intend and do not assume any obligation to update these forward-looking statements.

For more information, please contact:

Head of Capital Markets
Carolina Tovar Aragón
Email: investors@ecopetrol.com.co

Head of Corporate Communications
Marcela Ulloa
Email: marcela.ulloa@ecopetrol.com.co

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/ecopetrol-obtains-authorization-to-execute-a-loan-agreement-with-local-banks-for-one-trillion-pesos-302174822.html

SOURCE Ecopetrol S.A.

FAQ

What loan authorization did Ecopetrol receive in June 2024?

Ecopetrol received authorization to execute a loan agreement of up to one trillion Colombian pesos (COP).

With which banks did Ecopetrol secure the loan agreement?

Ecopetrol secured the loan agreement with Banco de Bogotá, Banco de Occidente, and Banco Popular.

What is the term and grace period for Ecopetrol's new loan?

The loan term is seven years with a two-year grace period.

How will Ecopetrol use the funds from the loan?

The funds will be used for non-investment expenses, including paying existing financial commitments.

What interest rate applies to Ecopetrol's new loan?

The interest rate is indexed to the IBR, as agreed with the banks.

Ecopetrol S.A.

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