The Araras production facility in the Urucu oil and gas field, in the Amazon rainforest near Coari, Brazil. (Photographer: Pedro Lobo/Bloomberg News)

Engie, Caisse Plan to Bid $9 Billion For Petrobras Pipeline

(Bloomberg) -- French utility Engie SA and a Canadian pension fund plan to offer as much as $9 billion (34 billion reals) for Petrobras’s natural gas pipeline network, potentially a $1 billion boost from their initial bid, according to people with knowledge of the matter.

Petroleo Brasileiro SA is now finalizing terms with Engie and the Canadian fund, Caisse de Depot et Placement du Quebec, the people said, asking not to be named because the talks are private. Petrobras then plans to touch base with other groups for a second round of bids that must meet the terms agreed to with Engie. In April, Mubadala Development, in a consortium with EIG Global Energy Partners, and Macquarie Group Ltd. presented two separate bids, people said at the time.

Spokesmen from Engie, Caisse and Petrobras declined to comment.

The 2,800-mile (4,500 kilometer) pipeline network, Transportadora Associada de Gas, or TAG, spans ten states in northeastern Brazil. It’s being sold as part of a wider push by Petrobras to sell $21 billion in assets to slash debt. If consummated, it would be the company’s biggest divestment ever.

Engie, whose initial $8 billion bid including debt was the highest, is planning to raise its offer to ensure it prevails at a time when cheap credit is available to help finance the acquisition, the people with knowledge of the talks said.

Petrobras aims to conclude a deal this year, the people said, but the divestment program still faces uncertainty. In July, Ricardo Lewandowski, a Supreme Court judge, ruled that the sale of any government-owned company asset, including subsidiaries, must be approved by Congress.

Petrobras will try to resume negotiations over TAG even without a final decision from the court, Valor newspaper reported Oct. 10.

In 2017, Petrobras sold Nova Transportadora do Sudeste, a similar but smaller pipeline network in Brazil’s southeast, to a consortium led by Brookfield Asset Management for $5.2 billion.

©2018 Bloomberg L.P.