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Brookfield consortium to take majority stake in Petrobras' NTS for $5.2bn

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Acquisition   NTS is a 2,048 km pipeline system

Brookfield Infrastructure said it will acquire a 90% controlling stake in Nova Transportadora do Sudeste (NTS) owned by Petrobras, for approximately $5.2 billion.

Brookfield Infrastructure and institutional clients of Brookfield Asset Management, including CIC Capital Corporation, GIC Private Limited and others have reached agreement to acquire a 90% controlling stake in NTS, a system of natural gas transmission assets in the southeast of Brazil currently owned by Petroleo Brasileiro Petrobras.

Brookfield managed entities will hold a controlling interest in the Consortium. Brookfield Infrastructure's investment will be a minimum of approximately 20% of the transaction, representing approximately $825 million of the transaction consideration payable on closing.

The remainder will be owned by institutional partners. Petrobras, as a 10% owner in NTS, will have customary governance rights commensurate with the size of its interest.

NTS is a 2,048 km pipeline system that provides the transportation network for natural gas in Brazil's most industrialized and populated states in the south-central region of the country.

The majority of the company's assets were installed in the last ten years, connecting the states of Rio de Janeiro, Sao Paulo and Minas Gerais with natural gas coming from Bolivia and Brazil's offshore oil and gas fields.

These assets operate under long-term concessions with revenues derived from five "ship-or-pay" GTAs, subject to a regulated utility structure overseen by the national energy regulator.

The GTAs account for 100% of the pipeline capacity and provide the country's main gas supplier, Petrobras, access to end users including local distribution companies, gas fired power generation plants and industrial users.

The weighted average remaining life of the GTAs is 14 years. In addition, upon expiry of the GTAs, NTS is entitled to continue to earn a return on and return of capital remaining in the business, plus recovery of all operating and maintenance costs until the end of the concessions in 2039 through 2041.

Under the terms of the transaction, the purchase price is payable in two tranches an up-front payment of $.3 billion due on closing of the transaction, and the balance payable on the fifth anniversary of this closing.

Brookfield Infrastructure will fund its proportionate share of the up-front payment (approximately $825 million) from existing liquidity which totalled approximately $2 billion at June 30, 2016.

As part of the transaction, Brookfield Asset Management has agreed to participate initially for an approximate 30% interest in the Consortium.

Brookfield Asset Management expects to syndicate its holdings prior to closing of the transaction and Brookfield Infrastructure has priority rights to take up a portion of this syndication.

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