Brookfield, other investors to pay $4.34 billion on closing, $850 million in five years
By Jeb Blount
RIO DE JANEIRO, Sept 23 (Reuters) – Brazil’s state-owned oil producer Petrobras agreed to sell 90 percent of a natural gas pipeline unit to a group led by Canada’s Brookfield Asset Management Inc for $5.2 billion, the companies said Friday.
The move is part of an asset-sale program at financially troubled Petroleo Brasileiro SA, as Petrobras is formally known, designed to reduce the company’s $125 billion of debt, the largest in the global oil industry.
The Brookfield-led consortium agreed to pay $4.34 billion for Nova Transportadora do Sul SA, or NTS, when the deal closes and $850 million in five years, according to Brookfield and Petrobras.
The investor group includes two sovereign wealth funds, China’s CIC Capital Corp and Singapore’s GIC Private Ltd.
For Ricardo Pinto, chief executive of natural gas consultancy Gas Energy in Porto Alegre, Brazil, the sale represents an important step in opening up a Brazilian gas market that has stalled despite increasing gas production.
“Brazil’s gas market has been held back by government regulation and Petrobras’ dominance of the transportation market,” he said. “While the sale will have little immediate impact on gas volumes, it opens the market and Petrobras up to competition.”
Reuters reported the main terms of the deal between Petrobras and Brookfield, including the sale price, on Sept. 6, citing sources with direct knowledge of the transaction.
The sale, which is still subject to approval by shareholders and Brazilian regulators, expands Petrobras’ asset sale plans.
On Tuesday Petrobras added a program to sell $19.5 billion of assets and partnerships between 2017 and 2018 to an existing plan to sell $15.1 billion of assets in 2015 and 2016.
Petrobras’ preferred shares, the company’s most-traded class of stock, fell 2.21 percent to 13.69 reais in Sao Paulo, as world oil prices slumped on reports Saudi Arabia does not expect the Organization of the Petroleum Exporting Countries, or OPEC, to cut output at a meeting next week.
Under the accord, Brookfield Infrastructure Partners Ltd will invest at least 20 percent of value of the deal, while Brookfield Asset Management has an initial investment of about 30 percent.
NTS transports natural gas in south-central Brazil and provides the country’s most populous and industrialized states – Minas Gerais, São Paulo and Rio de Janeiro – with natural gas from Bolivia and Brazil’s offshore oil and gas fields.
Rodrigo Costa, Petrobras’ general manager for natural gas, told reporters the sale of NTS would not affect existing natural gas contracts, which expire between 2025 and 2031.
He said transport prices for that gas will be set by the contractual terms.
Petrobras, though, will not have exclusivity in pipeline usage, Costa noted, though at the moment the company has contracted 100 percent of NTS capacity.
Its Transpetro shipping and pipeline company has a management and maintenance contract with NTS that will continue in effect, he added.
He also said Petrobras is doing everything it can to make sure the deal closes by the end of this year.
(Reporting by Jeb Blount in Rio de Janeiro, Arathy S Nair in Bengaluru, Brad Haynes in Sao Paulo; Editing by W Simon and Chizu Nomiyama)