Brazilian court approves Petrobras’ NTS sale

14 March 2017, Week 10, Issue 654

A Brazilian court has overturned an injunction that had stopped Petrobras from selling its 90% stake in a gas transportation company in a deal worth around US$5.2 billion.

The sale of the Nova Transportadora do Sudeste (NTS) to a consortium led by Canada’s Brookfield Infrastructure Partners can now proceed, state-run Petrobras said in a statement.

The sale was approved by the Petrobras board in September as part of the company’s extensive divestment programme. But it was suspended on February 10 by a judge in the state of Sergipe in northeastern Brazil after an oil workers union launched a legal action. On March 9 that decision was overruled by a higher court.

"With the favourable decision, Petrobras can continue with this sale operation. The transaction is part of a programme of partnerships and divestments which totalled US$13.6 billion in 2015-16," Petrobras said.

"Both parties remain committed to closing the transaction in an expedited timeframe upon satisfaction of [the] remaining conditions," Toronto-based Brookfield said in a statement on its website.

NTS is a Petrobras-owned company that supplies gas to southeastern Brazil. The Brazilian NOC has been selling off non-core midstream and downstream assets as part of its divestment programme, though the courts have blocked several sales.

When the sale was first announced, the Canadian company said a consortium it led, which included CIC Capital Corporation and GIC Private Limited, would acquire 90% of NTS, with Brookfield’s managed interests holding a controlling interest in the consortium. Brookfield Infrastructure’s investment is around 20% at US$825 million.

NTS has a transportation system comprising 2,048 delivery points that pipes gas to southeast Brazil, which is the country’s most populous and industrialised region and is home to its two biggest cities, Sao Paulo and Rio de Janeiro. All of the company’s volume is contracted under ‘ship-or-pay’ agreements, Brookfield said.

The Canadian firm anticipates that the Brazilian gas market will grow "substantially" by 2030 as supply from the country’s offshore pre-salt fields ramps up. In December, 49 mcm per day of gas was extracted from 68 pre-salt wells.

When the NTS transaction closes, Petrobras will receive US$4.3 billion up front and the rest in five years.

Edited by

Ryan Stevenson

Managing Editor

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