Government's loss of credibility in the market was decisive for Ecopetrol's rating downgrade
Ecopetrol presented its financial statements for the July-September quarter. Photo: Private archive
TL;DR
- Moody's downgraded Ecopetrol's credit rating from Ba1 to Ba2 and changed the outlook to negative.
- The downgrade stems from a less favorable view of Colombian government support, increased perceived governmental interference, and lack of clarity on support mechanisms.
- Corporate governance issues and potential refinancing risks also influenced the rating.
- Ecopetrol's individual rating (BCA) was reaffirmed at b1, recognizing its strong business profile as Colombia's main integrated oil and gas company.
- The government's alternative payment method for the FEPC, involving Treasury Securities (TES) instead of cash, weakens short-term cash flow visibility.
- Executive and board-level turnover at Ecopetrol raises concerns about state-related corporate governance risk and political influence.
- Moody's anticipates tighter liquidity in 2026 and 2027 due to expected negative free cash flow, sustained capital expenditure, high dividend distributions, and potential delays in FEPC collections.