Supreme Court Rules That Petrobras Is Authorized to Sell Refineries and Other Subsidiaries Without Congressional Approval

With the Victory in the STF, Petrobras is Authorized to Sell Its Refineries and Subsidiaries Without Congressional Approval; Values May Reach R$ 83.6 Billion

After a Lawsuit Filed by Lawmakers (remember the case) claiming that Petrobras was circumventing rules to slice its assets and defraud the need for consultation with the Legislative, the state-owned company emerged victorious in the STF ruling that occurred in yesterday’s session (10/01). The vote concluded with six votes in favor of allowing the sale against four opposed.

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Voting in favor of Petrobras were Ministers Luis Roberto Barroso, Alexandre de Moraes, Cármen Lúcia, Dias Toffoli, Gilmar Mendes, and Luiz Fux (President of the Court). The dissenting votes came from Reporter Edson Fachin, Rosa Weber, Ricardo Lewandowski, and Marco Aurélio Mello. Minister Celso de Mello was not present.

Thus, Petrobras is free to proceed with its divestment plan without the need for Congressional approval, which anticipates the sale of up to US$ 30 billion in assets by 2024, including eight refineries, representing more than half of its refining capacity.

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Petrobras Plans to Sell Up to R$ 83 Billion in Assets to Reduce Debt

The sale of the refineries could reach R$ 83 billion and shorten the path for Petrobras to align its debt with that of other oil companies, increasing its capacity to invest. At the same time, it may pay more generous dividends to its shareholders – both the Union and minority shareholders.

Despite being 35% lower than in June 2014, when the company owed nearly US$ 140 billion, Petrobras’ gross debt in the second quarter of 2020 stood at US$ 91 billion, consuming about 26% of the state-owned company’s cash for interest payments and debt rollover.

Petrobras aims to reduce the total to US$ 60 billion in 2022. The goal is to sell non-strategic assets and subsidiaries to reduce its debt, which is partly a result of the “Petrolão” scandal, unprofitable investments, and price control in previous administrations.

According to its strategic plan, Petrobras intends to sell between US$ 20 billion and US$ 30 billion in assets by 2024, including eight refineries: Rnest (PE); Rlam (BA); Repar (PR); Refap (RS); Regap (MG); Reman (AM); Lubnor (CE); and Six (PR).

If it reaches this goal, the state-owned company can pay dividends based on cash generation, which remained strong even amid the oil shock, thanks to the profitability of pre-salt and the recovery of the Chinese economy.

Petrobras began its divestment plan in 2016, during Pedro Parente’s administration (Temer government), based on the State-Owned Companies Law, and intensified the program during Roberto Castello Branco’s administration (Bolsonaro government), following the STF’s understanding.

The company wants to focus its operations solely on refining and marketing derivatives located in the Southeast (SP and RJ). The company would also like to exit the gas, biodiesel, fertilizers, and LPG sectors. In the case of gas, the exit is part of an agreement with the Economic Administrative Council (Cade) for market deconcentration.