Government on Alert: Petrobras Plans Buyback of Refinery Sold for $1.8 Billion in 2021

Written by Roberta Souza

Published on 19/07/2024 at 12:31

Foto: reprodução FUP

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Brazilian State-Owned Company Considers Reacquisition of Refinery Sold to Mubadala in 2021

The state-owned company Petrobras (PETR4) is in advanced negotiations to repurchase the Mataripe Refinery (formerly RLAM), which was sold to the Mubadala fund in 2021 for US$ 1.8 billion. According to information from Estadão, the state-owned company and Mubadala are about to finalize a binding agreement, which rekindles concerns about a possible government intervention in Petrobras, according to the website Infomoney.

Details of the State-Owned Company’s Negotiation

Petrobras has already completed due diligence and may make a binding offer by September, with the closure of the transaction expected in 2025, depending on the approval of the company’s board of directors. This move is viewed cautiously by the market, particularly by Goldman Sachs, which warns of the risk of government intervention, given that the current federal government has previously criticized the sale of Petrobras assets.

The current strategic plan of Petrobras includes an additional capex of up to US$ 11 billion for mergers, acquisitions, and other investments between 2024 and 2028. However, this budget may limit extraordinary dividends in the short term.

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Market Value and Regulatory Challenges

According to Bradesco BBI, the current value of the Mataripe Refinery of the state-owned company ranges between US$ 1.6 billion and US$ 2.8 billion, not considering investments in the biodiesel project. The main question is whether Petrobras will be able to acquire the ownership control of the refinery, especially after the recent amendment to the agreement with the Administrative Council for Economic Defense (Cade). This amendment relieves Petrobras of selling some refineries but maintains the obligation to divest from others, including RLAM.

Market Impact and Dividend Prospects

BTG Pactual considers this move negative, since the state-owned Petrobras has been obtaining lower returns in the refining segment compared to its main exploration and production (E&P) business. Although some analysts argue that there are obstacles preventing Petrobras from increasing investments in E&P, BTG believes that the best strategy would be to return higher dividends to shareholders.

However, BTG does not foresee a significant reduction in dividend payments in the short term, as the negotiation has not yet been confirmed and, if it is, it may involve the acquisition of a smaller stake in the refinery. The bank estimates that the transaction would only be completed in 2025, considering the necessary governance procedures. Additionally, BTG’s model already includes about US$ 2 billion for mergers and acquisitions over the next 12 months, meaning that the repurchase of Mataripe is largely priced in.

Adjusting the sale value for U.S. inflation (12%), the current cost of the refinery would be close to US$ 2 billion, or US$ 2.1 billion when including an estimate of US$ 300 million for investments made by Mubadala to improve the asset.

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Government on Alert: Petrobras Plans Buyback of Refinery Sold for $1.8 Billion in 2021

Brazilian State-Owned Company Considers Reacquisition of Refinery Sold to Mubadala in 2021

Details of the State-Owned Company’s Negotiation

Market Value and Regulatory Challenges

Market Impact and Dividend Prospects

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Government on Alert: Petrobras Plans Buyback of Refinery Sold for $1.8 Billion in 2021

Brazilian State-Owned Company Considers Reacquisition of Refinery Sold to Mubadala in 2021

Details of the State-Owned Company’s Negotiation

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