By Aaron Weinman
NEW YORK, Jan 24 (LPC) - French electric utility Engie and Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ) are raising a loan of up to US$8bn to back the purchase of a natural gas pipeline system in Brazil from state-owned oil company Petróleo Brasileiro (Petrobras), banking sources said.
Engie and CDPQ are talking to at least eight international banks including BNP Paribas, Mizuho and Sumitomo Bank. Brazilian banks Itaú Unibanco, Banco do Brasil and Bradesco are also expected to commit to the financing, the sources said.
The financing package for the Transportadora Associada de Gás (TAG) pipeline unit is expected to have a maturity of eight to ten years, and will likely be raised at the target company level.
Loans for Latin American companies usually have maturities of three to five years, and the longer maturity shows confidence in the credit, the sources said.
Petrobras was in exclusive talks with Engie and CDPQ over the sale of TAG last year, before the sale was stalled by an injunction from Brazil’s Supreme Court in July, which required the country’s Congress to approve the sale of any state-owned asset.
Brazil’s solicitor general overturned the injunction in early January, allowing Petrobras to reopen bidding for potential buyers interested in buying TAG.
Before the injunction, Engie and CDPQ had submitted the highest bid for TAG, which operates natural gas pipelines in Brazil’s north and northeast.
Other consortiums that also expressed interest in the assets included a group comprising EIG Global Energy Partners and the United Arab Emirates’ sovereign wealth fund Mubadala and a party made up of Australian investor Macquarie, Singaporean sovereign wealth fund GIC and the Canada Pension Plan Investment Board (CPPIB), sources previously told LPC.
Engie, CDPQ, Petrobras and the banks declined to comment or could not immediately be reached for comment.
Petrobras Chief Executive Officer Roberto Castello Branco is expected to push forward with divestment and partnership opportunities in the distribution and natural gas businesses after taking over from Ivan Monteiro in January.
Petrobras is expected to be the highest spending oil and gas firm in South America through 2025, according to figures from GlobalData.
Castello Branco will also prioritize investment into the more profitable deepwater oil and gas exploration and production segments.
The Brazilian oil giant is estimated to need approximately US$49.4bn over the next six years for almost 40 project opportunities, data and analytics firm GlobalData said in a report on January 22.
“Petrobras’ planned and announced projects mainly focused on upstream production projects and refineries,” said Soorya Tejomoortula, an oil and gas analyst at GlobalData.
The company’s exit from natural gas distribution started to take shape in September 2016 when it sold Nova Transportadora do Sudeste (NTS), a pipeline operator in Brazil’s south and southeast, for US$5.2bn to a group comprised of Canadian investors Brookfield Asset Management and British Columbia Investment Management Corp, as well as Singapore’s GIC and the China Investment Corp.
Petrobras’ latest five-year investment plan, unveiled on December 5, seeks to raise close to US$27bn from divestments and partnerships.
Proceeds from asset sales will go towards lowering Petrobras’ debt load, which is considered one of the largest among oil and gas firms.
Net debt was roughly 291.8bn (US$77.5bn) Brazilian reais at the end of the third quarter, Petrobras said in its quarterly results presentation. (Reporting by Aaron Weinman. Editing by Michelle Sierra and Lynn Adler)