Brazilian construction conglomerate Odebrecht SA is in advanced talks on selling its majority stake in a US$5 billion natural gas pipeline project in Peru to Canada’s Brookfield Asset Management Inc, Peru’s finance minister said in a televised interview.
The two companies and the government of Peruvian President Pedro Pablo Kuczynski reached an agreement on Friday, Alfredo Thorne said.
“We’re about to close” the deal, Thorne told local journalist Jaime de Althaus in an interview late on Tuesday. “I think we’ll be signing before the end of the year and construction would begin at the start of next year.”
Techint Group would also join the pipeline project as a junior partner and would be tasked with pipeline construction, Thorne added.
Brookfield, Techint and Thorne did not immediately respond to requests for comment.
Odebrecht said it was “still early” to comment.
Thorne said Brookfield agreed to keep an anti-corruption clause in the pipeline contract, a condition that the government has been firm on but which had been a deal breaker for U.S.-based Sempra Energy in acquisition talks that collapsed last month.
Sempra has said the clause would allow Peru to seize the project if Odebrecht were found to have broken any laws. The government has described the clause as a way to prevent corruption going forward and said it is part of any public works contract.
Odebrecht is at the centre of Brazil’s biggest-ever graft scandal and worries about liability for corruption have snagged financing for the pipeline and complicated its attempt to sell its stake in the project as stipulated by potential lenders.
As the project stalled, the government considered rescinding the contract altogether to hold a new auction. But Odebrecht’s junior partner on the project, Peruvian construction group Grana y Montero, said the government would have to pay more than US$1 billion in compensation for investments made if it started from scratch.
Thorne said the government was now considering holding an auction to find a company to build smaller pipelines to bring natural gas to cities in southern Peru.
The pipeline concession was designed in the government of former president Ollanta Humala as a way to transport abundant natural gas reserves from southern Peru to fuel power plants and a future petrochemical complex on the coast.
An Odebrecht-led consortium won the rights to build and operate the project in 2014 after its sole competitor was disqualified the day of the auction.
Peruvian prosecutors investigating Humala for potential money laundering have accused him of taking illicit funds from Odebrecht before taking office.
Odebrecht now controls a 55 percent stake in the project, Spanish energy company Enagas SA has 25 percent and Grana 20 percent.
(Reporting By Marco Aquino; Writing by Mitra Taj; Editing by Andrea Ricci)
Photo courtesy of Reuters/Janine Costa