Engie buys Petrobras gas pipeline company for US$8.6 billion

Luis Bulcao Pinheiro
17 April 2019

A slew of law firms have worked on Petrobras’ US$8.6 billion sale of gas pipeline company TAG to a consortium formed by French energy company Engie and Canadian fund CDPQ, in what is thought to be the largest privatisation ever in Brazil.

Jones Day in New York and São Paulo; Stocche Forbes Advogados in Rio de Janeiro and São Paulo; and the Rio de Janeiro offices of Schmidt, Valois, Miranda, Ferreira, Agel Advogados and BMA – Barbosa, Müssnich, Aragão advised Engie.

Tauil & Chequer Advogados in association with Mayer Brown in Brasília, Rio and São Paulo represented CDPQ. Petrobras hired Machado Meyer Advogados in São Paulo.

TAG has a 4,500-kilometre gas transmission network, Brazil’s largest.

The deal was signed on 5 April after Engie and CDPQ beat two rival bids. The consortium acquired 90% of TAG. Petrobras will hold the remaining 10%. The deal is part of Petrobras’ extensive divestment programme.

Stocche Forbes partner Frederico Moura says – in addition to its record value – the deal was complex because it involved intensive negotiations on many different fronts, including public bidding, financing, regulation and over existing contracts. “There was great pressure from Petrobras’ senior management to accomplish the company’s divestment programme and it was particularly challenging to harmonise all the efforts,” he says.

The deal was interrupted in 2018 following a Supreme Court injunction brought by Judge Ricardo Lewandowski, who argued that privatisations required congressional approval. In January, the president of the Supreme Court, Dias Toffoli, decided that approval was not necessary, and Petrobras resumed the transaction.

The sale of TAG is a significant step towards the opening of the gas sector in Brazil. “This deal definitively marks the break of Petrobras’ monopoly in the gas chain,” says Moura. The state-owned giant announced it will focus on the production of gas from the pre-salt deep sea reserves. The company is also planning to sell gas distributor leader Liquigas.

Tauil & Chequer’s managing partner Alexandre Chequer agrees that the end of Petrobras’ monopoly bodes well for the sector. “Energy is extremely costly in Brazil. As the monopoly ends, this market is likely to grow immensely and become much more dynamic,” he says. Chequer also points out that Brazilian legislators are currently discussing a new regulatory framework for the gas sector. “There are a lot of conflicting interests into play, but if all goes well the new regulations will have great potential to foster efficiency in the market,” he says.

Gas is becoming an increasingly strategic source of energy in Brazil. The country’s main source of electricity currently comes from hydroelectric power plants, but that might change. “The greatest potential for hydro power is in the north of the country but there are great environmental concerns and infrastructure challenges, so the natural liquefied gas is the future of Brazil’s energetic matrix,” says Chequer.

Schmidt Valois’ partner Paulo Valois says the sale sends a strong signal that Petrobras is committed to its divestment programme. “This is a very important transaction for the country. It opens opportunities for new players in the gas market who are willing to bring investment,” he says.

Counsel to Engie

In-house counsel – Patrick Baeten, Oyhana Maurat, Tim Venables, Alan Duque Estrada Parker, Guilherme Schmitt, Ana Elisa Mellone and Christina Barbosa de Aguiar

Jones Day

Partner Marcello Hallake and associates Violeta Libergott and Tamara Ribeiro in São Paulo; and partners Wade Angus and Rob Ashley, and associate John Nogueras in New York

Stocche Forbes Advogados

Partners Frederico Cursino de Moura, Bruno Gandolfo Damico, Renato Souza Coelho, Paulo Casagrande and Guilherme Coelho, and associates Ricardo Freoa, Laercio Munechila, Pietro Bianchi, Yves Dutra, Marina Falcone Chaves, Mariana David and Caio Morais in Rio de Janeiro and São Paulo

Schmidt, Valois, Miranda, Ferreira, Agel Advogados

Partners Paulo Valois Pires, Guilherme Schmidt and Anna Paula Goes, and associates Manuela Dana, Daniela Loureiro, José Eduardo Siqueira, Rodrigo Pinheiro, Lara Lebreiro, Clarissa Prallon, Luciana Xavier Cotrim, Ana Clara Scofield and Arthur Vasconcellos in Rio de Janeiro

BMA – Barbosa, Müssnich, Aragão

Partners Anna Carolina de Oliveira Malta and José Guilherme Berman, and associates Camila Cuschnir, Luis Marcelo Abdalla, Jean Jaldin, Geórgia Malafatti and Carolina Marcondes Ferraz Astolfi Pedro in Rio de Janeiro

Counsel to Caisse de dépôt et placement du Québec – CDPQ

In-house counsel – François Duquette and Sophie Gallizioli

Tauil & Chequer Advogados in association with Mayer Brown

Partners Alexandre Chequer, Victor Galante, Débora Yanasse, Guido Vinci and Gustavo Fernandes, counsel Fernanda Bastos, and associates Luciana Sodré, Eduarda Nagle, Lívia Limain, Luiz Santiago, Francisco Mastropietro in Rio de Janiero; partners José Paulo Marzagão, Michel Sancovski, Eduardo Gaban and Ludmila Braga, and associates Dicéa Ferraz, Maria Eugênia Kanazawa, Fernando Issa and Guilherme Silveira in São Paulo; and partner Luis Adams and counsel Tiago Macedo in Brasília

Counsel to Petrobras

In-house counsel – Danielle Dantas, Josiane Simioni and Fernanda Valeriano

Machado Meyer Advogados

Partners Gisela Ferreira Mation, Ivana Amorim de Coelho Bomfim, Maria Fernanda Soares, Daniel Szyfman, Igor Marcell Ramos Finzi and Arthur Bardawil Penteado, and associates Anna Carolina Ramos Coelho Joppert, Gabriel Esteves Alves De Carvalho and Raphael Barboza Correia in Rio de Janeiro; partner Luana Komatsu Falkenburger and associate Laura Ducati Dabronzo in São Paulo.


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