Brazil’s Petrobras nears terms over TAG pipeline sale: Reuters


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Brazil’s state-controlled oil company Petróleo Brasileiro (Petrobras) could present a new sale and purchase agreement before the end of December for the sale of the Transportadora Associada de Gás (TAG) pipeline, after a Brazilian Supreme Court injunction in July stalled the sale.

The sale of TAG, which operates natural gas pipelines in Brazil’s north and northeast, could fetch Petrobras as much as US$7 billion, in one of the company’s largest-ever asset sales, three sources familiar with the process said. A new multi-billion dollar syndicated loan is expected to finance the acquisition, two sources said.

Petrobras unveiled a five-year investment plan on December 5 which outlined its plans to raise US$26.9 billion via asset sales and partnerships and make US$84 billion of investments by 2023. The plan is designed to cut Petrobras’ debt of US$88 billion which is one of the biggest among oil majors, Reuters reported.

Petrobras was aiming to raise US$21 billion from asset sales in 2017 and 2018, but the company is expected to fall short by almost US$10 billion because of the Supreme Court injunction, the sources said.

Selling TAG would see Petrobras scale back from the natural gas distribution business as it prioritizes more profitable investments such as Brazil’s deepwater oil and gas exploration and production segments, while divesting midstream assets such as refineries and pipelines, as well as overseas oil fields.

A consortium comprising French electric utility Engie and Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ) were in talks with Petrobras to buy TAG before July’s injunction ordered that Brazil’s Congress had to approve the sale of any state-owned asset.

Engie and CDPQ have mandated eight to 10 international banks to raise a loan to back the acquisition of TAG, two sources said. Three Brazilian banks, Banco do Brasil, Bradesco and Itaú BBA, are understood to be part of the club of mandated banks, the sources said. The banks declined to comment.

If the Supreme Court injunction is lifted, the French-Canadian consortium will have to present a new SPA to the market and allow time for counter offers from any other parties interested in buying TAG from Petrobras, the sources said.

At least two other consortiums shortlisted by Petrobras in February could present counter-proposals, the sources said.

A group comprising EIG Global Energy Partners and the United Arab Emirates’ sovereign wealth fund Mubadala, and a second team made up of Australian investment firm Macquarie, Canada Pension Plan Investment Board and Singaporean sovereign wealth fund GIC, previously expressed interest for the TAG pipelines, the sources said.

A consortium led by Brazil’s Pátria Investimentos and U.S. private equity firm Blackstone Group also looked at the initial proposal, but rescinded interest earlier this year, according to news reports.

Itaú BBA, the corporate and investment banking arm of Brazil’s Itaú Unibanco, is advising Petrobras on the sale of TAG, according to the sources. The bank declined to comment.

SHIFTING PRIORITIES

Petrobras began moving away from the natural gas distribution business in September 2016 when it sold pipeline operator Nova Transportadora do Sudeste (NTS), which runs natural gas pipelines in Brazil’s south and southeast, to a consortium led by Canadian investor Brookfield Asset Management.

Brookfield, along with British Columbia Investment Management Corp, China Investment Corp and Singapore’s GIC agreed to pay US$5.2 billion for NTS.

Petrobras’ decision to sell TAG, which operates a similar business in the north of Brazil, is part of the company’s plan to prioritize exploration and production, which is considered Petrobras’ most important value generating engine.

In October, Petrobras agreed to sell its 50 percent share in oil fields in Nigeria for US$1.53 billion to commodities trader Vitol, Africa Oil and Delonex Energy. It also netted approximately US$823 million last month when it offloaded stakes in 34 onshore oil fields in Brazil’s Rio Grande do Norte and three shallow water fields in the Campos Basin.

Petrobras declined to comment.

(Reporting by Aaron Weinman. Editing by Tessa Walsh and Michelle Sierra)

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