ENGIE announces that the consortium in which it holds a majority stake has won the competitive bidding process conducted by Petrobras for the sale of a 90% shareholding in Transportadora Associada de Gás S.A. (TAG) with a final and binding offer amounting to USD 8.6bn.
TAG is the largest natural gas transmission network owner in Brazil, a priority country within ENGIE’s recently announced strategic framework, with an asset base providing an attractive and stable regulated profit stream to ENGIE. TAG assets consists of 4,500 kilometers of gas pipelines in Brazil, which represents 47% of the country’s entire gas infrastructure.
The winning offer for the 90% equity stake in TAG was made by a consortium composed of ENGIE S.A, ENGIE Brasil Energia (1) and la Caisse de dépôt et placement du Québec (CDPQ). Petrobras will maintain a 10% equity stake in TAG.
ENGIE’s net total ownership of TAG (directly and indirectly through Engie Brasil Energia) will amount to 49.3% (2). As TAG will be jointly controlled, it will not be consolidated into their balance sheets. Within the TAG acquisition financing structure, a debt/equity ratio of 70/30 is targeted at closing. Given this secured financing structure and ENGIE’s net total ownership percentage, ENGIE expects to have a net debt impact of EUR 1.6bn in conjunction with the transaction.
In addition to its ownership, ENGIE will be the industrial partner for TAG, managing the asset after the closing of the transaction and taking 100% of the operations and maintenance after the third year.
This acquisition is fully aligned with ENGIE’s strategy to be the leader of the zero carbon transition. This transition requires sophisticated large-scale energy infrastructure such as the TAG pipeline network. Natural gas will increasingly contribute to the diversification and decarbonization of Brazil’s energy mix, replacing high carbon energy sources while complementing renewable generation. This acquisition is also in line with ENGIE’s objective to rebalance the geographic and regulatory exposures of its networks activities and to benefit from the steadily growing Brazilian gas market. TAG will provide ENGIE with revenues based on long-term contracts and the opportunity to broaden its local customer portfolio and develop new uses for gas transportation networks stemming from new technologies such as biomethane and green hydrogen. Finally, the financing partnership scheme implemented with CDPQ for this acquisition highlights ENGIE’s commitment to efficient capital allocation.
The transaction is conditional upon the approval of the relevant governance bodies of Petrobras and the Brazilian and European Union anti-trust authorities. The closing is expected before the end of the first semester 2019. The Group will detail further financial impacts of TAG acquisition once closing is achieved.
“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 decarbonization 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”, said Isabelle Kocher, ENGIE CEO.
(1)ENGIE holds a 68.7% stake in ENGIE Brasil Energia
(2)ENGIE ownership of the asset will be structured through a 29.25% stake held via a 100% direct subsidiary of ENGIE and through a 29.25% stake held by ENGIE Brasil Energia (resulting in an additional 20.1% economic interest in TAG for ENGIE)