Engie-led Consortium To Buy Brazilian Gas Network
A consortium led by Engie has won a tender to buy Brazil’s largest gas network, the French utility announced April 8.
The consortium, which also features Canadian fund la Caisse de dépôt et placement du Québec (CDPQ), bid US$8.6bn for the 90% shareholding in Transportadora Associada de Gas S.A. (TAG). The seller, Brazilian energy company Petrobras, will retain a 10% stake.
TAG is the largest natural gas transmission network owner in Brazil. Its assets consist of 4,500km of pipeline, which represents 47% of the country’s gas infrastructure. Engie calls Brazil a “priority country” in its recently announced strategic framework and said TAG will offer an attractive and stable regulated profit stream.
The buying consortium is composed of Engie, Engie Brasil Energia, and CDPQ. Engie holds a 68.7% stake in Engie Brasil Energia, meaning the French company will control 49.3% of TAG. Engie will manage the asset after the closing of the transaction and take over 100% of the operations and maintenance after the third year.
The asset will not be consolidated into Engie’s balance sheet. Engie expects to have a net debt impact of €1.6bn ($1.79bn) in conjunction with the transaction.
“This acquisition is fully aligned with Engie’s strategy to be the leader of the zero carbon transition,” the company said in a statement. “This transition requires sophisticated large-scale energy infrastructure such as the TAG pipeline network. Natural gas will increasingly contribute to the diversification and decarbonization of Brazil’s energy mix, replacing high carbon energy sources while complementing renewable generation.”
The deal also meets Engie’s objective to “rebalance the geographic and regulatory exposures of its networks activities and to benefit from the steadily growing Brazilian gas market,” it added. “TAG will provide Engie with revenues based on long-term contracts and the opportunity to broaden its local customer portfolio and develop new uses for gas transportation networks stemming from new technologies such as biomethane and green hydrogen.”
The transaction needs to be approved by Brazilian and European Union anti-trust authorities. The closing is expected before the end of the first semester 2019.