Moody's Downgrades Colombia's Ecopetrol to Junk Status

SEATTLE (Oil Monster):  Rating agency Moody's on Wednesday downgraded Colombian majority state-owned energy company Ecopetrol into junk territory, citing increased indebtedness, a boost in dividends and an ambitious investment plan over the next three years.

Moody's cut Ecopetrol's long-term issuer rating and senior unsecured ratings to Ba1, considered "junk," from Baa3.

Ecopetrol has been taking on more debt to finance its expansion plans, Moody's said, including the purchase of a majority stake in energy conglomerate Interconexion Electrica (ISA).

However, increased investments have not turned into similarly increased core earnings, Moody's said.

A number of Ecopetrol's planned projects, particularly those involving natural gas, are risky due to their deep-water, offshore conditions, Moody's added.

Meanwhile, Ecopetrol's available cash has been used to pay out dividends, the ratings agency said.

Ecopetrol downplayed the ratings cut in a statement, saying its share price would likely remain unaffected as its investors "prioritize business performance over rating announcements."

The firm added that it was committed to responsible debt management and that it was working to keep costs down.

Courtesy: www.reuters.com