Oil & Gas Financing of the Year: TAG Pipeline

SPONSOR: Engie/CDPQ
LOCATION: Brazil
FINANCING TYPE & SIZE: $8.6 billion acquisition
BANKS: Itaú BBA, Banco do Brasil, Bradesco, Mizuho, MUFG, BNP Paribas, Crédit Agricole, ING Capital, Société Générale, SMBC, BNP Brasil
LAW FIRMS: Stocche Forbes, Machado Meyer, Jones Day, Lobo de Rizzo, Stikeman, McCarthy, White & Case, Mattos Filho, Holland & Knight, Tauil & Chequer

When Petrobras put its 90% stake in a natural gas pipeline unit up for sale, it marked the state-run energy giant’s biggest-ever single asset sale.

A consortium led by Francé’s Engie and Canadian pension fund Caisse de dépôt et placement du Quebec (CDPQ) beat out several other prospective buyers after multiple rounds of bidding, offering $8.6 billion for the unit, Transportadora de Gas SA, or TAG.

“Engie is very involved in natural gas in other parts of the world, particularly Europe, but we had nothing in Brazil,” says Raphael Barreau, Engie’s head of acquisitions, investments and advisory in Brazil. “So this was an opportunity for us, and it was very important.”

The deal paved the way for Engie, which operates France’s gas network, to develop TAG, the largest natural gas transmission owner in Brazil. TAG operates a 2,800 mile pipeline network spanning 10 states in northern Brazil.

To help fund the acquisition, Aliança Transportadora de Gás Participações, a division of the Engie, issued BRL14 billion in debentures, while Engie and CDPG also arranged $5.95 billion in financing from 10 lenders, including BRL13.5 billion and $2.45 billion.

The international and local debt facilities rank as one of the largest acquisition financings in Brazil and among the largest successfully closed hybrid acquisition and project financings in Latin America.

Bradesco BBI was the lead coordinator on Aliança’s debenture deal, pricing the seven-year notes at 180bp over the DI interbank lending rate. Citi advised Engie and CDPQ on the deal while Santander advised Petrobras on the sale.