Engie-led consortium to buy 90% stake in TAG gas pipeline unit

A consortium comprising French energy firm Engie and Canadian investment fund Caisse de Depot and Placement du Quebec (CDPQ) has made the winning bid to buy a 90% equity stake in Petrobras’ TAG natural gas pipeline unit.

The consortium defeated competition from a team led by Itausa Investimentos Itau, and another bidder comprising EIG Global Energy Partners and Mubadala Development.

The Engie-led team offered $8.6bn for the interest in TAG, which owns and operates the largest natural gas transmission network in Brazil, including 4,500km of gas pipelines.

The total consideration for the sale includes the $800m payment by Engie in debts to Brazilian bank BNDES.

A source told Reuters that Engie subsidiaries own 75% of the winning consortium, while CDPQ holds the remaining 25%.

Engie CEO said: “Our acquisition of TAG is a significant milestone for Engie in Brazil, a key market for the group where we have been present for 23 years.

“It is fully aligned with Engie’s strategy to become the leader of the zero-carbon transition, supporting Brazil in the decarbonisation of its energy mix. It will also enable the group to build on its infrastructure expertise while diversifying its network activities and seizing opportunities in growing markets.”

The completion of the transaction is subject to approval by the governance bodies of Petrobras, as well as the Brazilian and European Union antitrust regulators, and is expected by the end of the first semester of this year.

Engie will be responsible for management of the pipeline unit and take 100% of the operations and maintenance after the third year of the closure of the deal.

Petrobras began the sale process in October 2017. The French company made the highest bidding in the first round. Other consortiums were invited to submit higher bids in another round.

The sale is part of the Brazilian firm’s disinvestment programme to reduce debt.

Petrobras will continue gas distribution through the TAG pipeline network under long-term contracts.