|Deal type||Growth equity|
|Investment date||December 2013|
Established in 1994, Ocensa manages Colombia’s largest crude oil pipeline. The system has an average pumping capacity of 616,000 barrels per day, with eight stations and four distinct segments extending nationally over a length of 830 kilometers between Colombia’s Llanos region and the Atlantic Coast.
The Ocensa pipeline is a core strategic asset for Colombia. The oil and gas industry accounts for 35% of foreign direct investment and more than half the country’s total exports, and Ocensa moves about 60% of domestic crude oil production and more than 70% of crude exports.
In December 2013, Advent International teamed up with Colombia’s two largest pension funds to purchase approximately 22% of Ocensa from Talisman Energy, Total Colombia Pipeline and Compañia Española de Petróleos. Cenit, a subsidiary of Colombian oil company Ecopetrol, retained a controlling stake in the business. Nine Advent professionals from Bogotá, Mexico City, Boston and New York worked on the deal, which marked our third investment in Colombia and fourth transaction in the energy sector in three years.
A STRATEGIC ASSET WITH STRONG FUNDAMENTALS
Our global energy team had been building its network and expertise in the oil and gas industry for some time prior to the Ocensa investment. One member of the team, Bogotá office head Mauricio Salgar, had extensive sector experience in Colombia, including a prior role as COO of Ecopetrol.
“We were attracted to Ocensa not only because of its strategic value to Colombia but also because of its compelling business model,” said Salgar. “The company has high margins, low working capital needs and strong, predictable cash flows. It also has a robust balance sheet with ample capacity to finance important new expansion projects.”
Ocensa was already operating Colombia’s most cost-efficient and reliable pipeline, but we saw potential to create even more value. “With Colombia’s crude oil output doubling over the previous six years, and a pipeline system running at close to 100% utilization, the company clearly needed to increase capacity to sustain growth,” said Gurinder Grewal, a managing director in Advent’s Boston office who helps coordinate our global activities in the energy sector. “We believed we could support Ocensa’s well-defined expansion plans by bringing operational expertise and helping it raise debt financing for the projects. We also recognized an opportunity to increase income from non-regulated services, such as blending, port services and offloading facilities.”
ACCELERATING VALUE CREATION
Over the past year, working in partnership with the management team and Cenit, we have helped Ocensa capture value along several of these dimensions.
Most important, we have supported two major expansion plans—Delta 35 and Potencia 135—which will increase pipeline capacity by 30%. Delta 35 came on line in November 2014, and Potencia 135 is expected to be operational in 2016. Luisa Lafaurie, Ocensa’s CEO, calls the initiatives “the culmination of the company’s most ambitious growth strategy ever—promising to catapult Ocensa into leadership of Colombia’s oil transportation business for the foreseeable future.” According to Lafaurie, the company has benefited from Advent’s introduction of improved practices and world-class advisors to help steer the projects in the right direction.
We also have encouraged Ocensa’s management to diversify the company’s capital structure from equity only to a more balanced combination of equity and debt. As a first step, Ocensa made its debut bond offering in May 2014.
A BALANCED PARTNERSHIP
As our investment progresses, Advent and Ocensa's management are both pleased with developments to date and the company’s positioning for future growth. Expansion plans are on track, and revenue and earnings are growing at healthy rates, in line with expectations.
Just as important, the partnership is proving to be a good fit. As Ocensa CFO Santiago Giraldo put it, “Previously, all of our shareholders were technical in nature. Advent has brought great balance as a strategic and financial partner. Its resources have made us a better operation and helped improve our stature in the international markets.”