Opening The Gas Market May Bring Wave Of Privatizations In The Distribution Sector

According to Experts, Government Program Will Cause Relevant Sector Companies to Sell Their Stakes in Distribution

The New Gas Market Program, presented at the end of June by the government, is expected to cause the most prominent companies in the sector to trigger a wave of privatizations and, in doing so, attract large international and local companies to evaluate the assets.
This sentiment is shared by sector experts, although most believe that the speed at which this will happen may not align with the government’s expectations.

The government relies on the gas opening to foster Industrial GDP growth, having even presented a target of 10% growth.

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Large companies are expected to show interest, such as groups already operating in the sector, including Brazilian Cosan, Spanish Naturgy and Repsol, Portuguese Galp, French Engie, as well as fuel and LPG companies and financial agents like pension and investment funds.

With the government’s program, Petrobras is expected to seek buyers for its stakes in 19 gas distributors out of the 27 companies operating in the sector in Brazil, and it has even signed a commitment with CADE to divest all its gas transportation and distribution assets by 2021.

According to the managing partner of the consulting firm Gas Energy, Rivaldo Moreira Neto: “There is no doubt… indeed, we will watch this privatization process, a very strong sales process of gas distributors to private hands.”
The consultant also added that the Ministry of Mines and Energy and the Ministry of Economy should encourage states to privatize their gas distribution state-owned companies.

Regarding state gas companies, Petrobras holds minority stakes in gas through Gaspetro, in which Japan’s Misui owns 49% of the shares, but on the other hand, it solely controls GasBrasiliano, in São Paulo, for example.

Against Their Will

However, the states are expected to oppose such government measures, as many of them will not want to lose control over their gas companies.
This is the main reason experts believe that privatizations will occur, but not at the speed expected; in favor of the government, there might be a trade-off with incentives, such as debt renegotiations for the states.

One of the states that has already shown support for privatizations is Rio Grande do Sul, but it is still limited, and according to experts, this wave could be like a pebble in a pond, but it will happen.

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