(Bloomberg) -- Galp Energia SGPS SA, Portugal’s biggest oil company, is planning a sale of its gas distribution assets in a deal that could the business at as much as 1.5 billion euros ($1.7 billion), people familiar with the matter said.
The company is working with Bank of America Corp. on the potential divestment, according to the people, who asked not to be identified because the information is private. Galp plans to send out preliminary information on the business to potential buyers shortly and will invite initial bids in the next few weeks, the people said.
The assets are likely to draw interest from infrastructure funds and other financial investors, the people said. No final decisions have been made, and there’s no certainty the deliberations will lead to a transaction, the people said. Galp shares rose as much as 6.7% in Lisbon on Wednesday.
An associate of Galp owns stakes in nine natural gas distributors in Portugal, according to the company’s website. Its network spans 13,015 kilometers (8,087 miles) and had a regulated asset base d at 1.1 billion euros at the end of 2018.
Galp sold a 22.5% stake in the gas distribution business to a consortium led by Marubeni Corp. in 2016. Galp Chief Executive Officer Carlos Gomes da Silva said last month that the company will consider “asset rotation” if required and that its natural gas infrastructure is a “key candidate.”
Representatives for Galp and Bank of America declined to comment.
The Portuguese company has followed other large oil producers in expanding in renewable energy. It agreed in January to pay about 450 million euros to buy a portfolio of Spanish solar projects from builder ACS Actividades de Construccion y Servicios SA.
Financial investors have snapped up gas distribution assets in Europe, lured by the promise of steady, long-term cash flows. Allianz SE and Canada Pension Plan Investment Board bought a 20% stake in the distribution business of Spain’s Gas Natural SDG SA for 1.5 billion euros in 2017. Danish pension fund ATP and the U.K.’s Universities Superannuation Scheme increased their stakes in Redexis Gas SA the next year.
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