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Petrobras fixes late-March deadline for TAG pipeline bids

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World Pipelines,

Petrobras has set a deadline of late-March for the receipt of binding proposals for a controlling stake in gas pipeline network Transportadora Associada de Gás (TAG), according to three anonymous sources with knowledge of the matter.

Three consortia, led by Australia’s Macquarie Group Ltd, French utility Engie SA, and United Arab Emirates’ sovereign wealth fund Mubadala Development Co, are preparing their offers, the sources added.

The three groups each delivered non-binding proposals in December for a 90% stake in the pipeline network, which owns 4500 kilometres of pipelines in northeast Brazil.

According to the sources, the three consortia are in negotiations with banks to discuss financing, with bids likely to be greater than US$7 billion (£5 billion); this would make TAG one of the largest divestments by Petrobras. The state-controlled company is selling its controlling stake in TAG as part of a US$21 billion two-year divestment plan to reduce its US$91 billion debt.

Petrobras, Engie and Mubadala did not immediately comment on the matter, while Macquarie have declined to comment.

In order to comply with Brazil’s audit court rules Petrobras may choose up to two of the three bidders for a final round if the leading proposals are very close in value, or choose a winner immediately, the sources added.

The consortia are not permitted to alter their components before the final bidding round, according to the sources.

Macquarie has partnered with Canada Pension Plan Investment Board, Singapore’s sovereign wealth fund GIC Pte Ltd and two Brazilian investment firms.

Mubadala has partnered with EIG Global Energy Partners LLC. It is not yet known whether Engie has partners.

Banks have been eager to finance the bids, one of the sources added, in light of the fact that Brazilian interest rates are currently at record lows as well as the very stable nature of the gas pipeline network.

Banks have also been encouraged by first results obtained by Canada’s Brookfield Asset Management Inc, leader of a group that paid US$5.2 billion last year for another gas pipeline unit sold by Petrobras, Nova Transportadora do Sudeste (NTS).

According to financial statements submitted by one of NTS’s shareholders, the company had net income of R$1.3 billion during the first nine months of 2017.

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