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Brazil bank negotiating to sell state gas distributors

19 May 2017 14:21 (+01:00 GMT)
Brazil bank negotiating to sell state gas distributors

Santiago, 19 May (Argus) — Brazil's BNDES development bank said it entered negotiations with seven state governments over the privatization of state-controlled natural gas distribution companies.

Results of the initial talks will be discussed in the next meeting of the federal government's Investment Partnership Program (PPI) launched in 2016, the date for which has not been set. The program is part of an effort by the government to help states cut debt, generate revenue and stimulate infrastructure investment.

The Pernambuco state government has already filed a formal request to include Copergas, its gas distribution company, in the PPI program.

The bank said another six states are in talks to sign on: Espirito Santo, Rio Grande do Sul, Rio Grande do Norte, Santa Catarina, Sergipe and Mato Grosso do Sul.

BNDES plans to hold the first tenders to seek technical studies on the sale of the assets in July.

The government's decision to privatize the gas distributors comes as state-controlled oil company Petrobras reduces its dominant position in the gas industry. The company has already sold some midstream assets and is seeking to sell two of its three LNG terminals and associated power stations.

Some of the distributors to be privatized, such as Sulgas (Rio Grande do Sul), SCgas and MSGas (Mato Grosso do Sul) are positioned to partially replace Petrobras in a gas sales contract with neighboring Bolivia. The current contract expires in 2019.

On 5 May, six states, including Sao Paulo, Mato Grosso , Mato Grosso do Sul, Parana, Santa Catarina and Rio Grande do Sul, reached a preliminary agreement with the Bolivian government and its state-controlled oil company YPFB to create a working group to conduct negotiations for new gas contracts to these states.

The working group is scheduled to meet on 22 May at the International Gas Union meeting in Florianopolis, Santa Catarina state, to sign a memorandum of understanding.

The PPI initiative also coincides with a regulatory overhaul of the gas sector to foment competition and investment. The mines and energy ministry is currently finalizing the new regulations.

The government published a decree on 20 April authorizing BNDES to help states develop and structure projects to attract investment and expand gas infrastructure.

The studies on the framework and terms of the distribution concession tenders are expected to take roughly six months.