Brookfield consortium buys natural gas pipeline network in Brazil for US$5.2B

TORONTO — A consortium led by Brookfield Infrastructure (TSX:BIP.UN) has signed a deal to buy a controlling stake in a natural gas pipeline system in Brazil from Petroleo Brasileiro S.A. (Petrobras) for US$5.2 billion.

Under the deal announced Friday, the consortium would acquire a 90 per cent stake in Nova Transportadora do Sudeste S.A. (NTS). Petrobras, Brazil's state-run oil company, would hold a 10 per cent stake.

"This is a unique opportunity to invest in a large-scale, high-quality utility business and participate over time in Brazil's growing gas industry," Brookfield Infrastructure CEO Sam Pollock said in a statement.

"We are very pleased to be significantly expanding our utilities business in a sector and geography that we know well and that we believe will offer opportunities to deploy further capital at attractive risk-adjusted returns."

Brookfield said NTS has a 2,048-kilometre natural pipeline network in Brazil's core industrialized regions.

Under the agreement, the pipelines would be operated by a subsidiary of Petrobras under a multi-year operations and maintenance contract.

Brookfield Infrastructure would have the ability move the pipelines to a fully stand-alone business if it wants.

Petrobras has been at the centre of a corruption scandal in Brazil.

The company had set a target of US$15.1 billion in partnerships and divestments for 2015 and 2016. In a strategic plan announced this week, Petrobras set a target of a US$19.5 billion in partnerships and divestments for 2017 and 2018.

The deal announced Friday is expected to close in December. The purchase price is payable in two tranches including US$4.3 billion due on the deal's closing and the balance payable on the fifth anniversary of the completion of the agreement.

Brookfield Infrastructure said its stake in the consortium would be at least 20 per cent. It would fund its share of the upfront payment from existing liquidity.

Brookfield Asset Management (TSX:BAM.A) has agreed to participate initially for an approximate 30 per cent interest in the consortium.

Other partners in the investment group include CIC Capital Corp. and GIC Private Ltd.