Spotlight: The privatization of Brazil’s ES Gás

The sale of Brazilian gas distributor ES Gás is not expected to significantly surpass the minimum value of 1.3bn reais (US$250mn) established in the privatization tender, which is scheduled to be held on Friday. 

“It doesn't seem to be a business with so much upside,” a source familiar with the subject told BNamericas. 

ES Gás is responsible for the distribution of piped natural gas in Espírito Santo state and operates in the residential, commercial, industrial, automotive, air conditioning, cogeneration and thermoelectric segments, totaling more than 74,328 consumer units.

It is controlled by the government of Espírito Santo, which holds 51% of the company's voting capital, and by Vibra Energia (49% of the voting capital and 60.34% of the total capital).

The privatization aims to improve the quality of natural gas distribution and to boost investment in infrastructure.

Compass Gás e Energia was seen as one of the leading candidates to buy ES Gás, but, according to local news outlet Estadão Broadcast, the company has given up on submitting a bid. 

Part of the Cosan group, Compass is the owner of São Paulo and Rio Grande do Sul state gas utilities Comgás and Sulgás, and of the gas distribution holding Commit (formerly Gaspetro). 

Potentially interested buyers include Colombia’s Promigas and local oil and gas producer Imetame Energia. 

Promigas is the largest gas transport and distribution player in Colombia and Peru.

“Brazil is much bigger than any of their markets, and it might make sense to land here,” the source said. 

Imetame owns several oil and gas exploration and production assets, in addition to natural gas-fired power generation projects, in Espírito Santo and the neighboring state of Bahia. 

Also producing gas in Espírito Santo are Seacrest Petróleo, 3R Petroleum, Origem Energia, BGM Petróleo, Mandacaru Energia and Vipetro, but it would be surprising to see them vying for ES Gás since they are essentially focused on the upstream business. 

Meanwhile, Brazil’s largest oil and gas producer Petrobras has pulled out of the gas distribution segment and is selling its Espírito Santo fields, and Shell has seen its Parque das Conchas output decrease in recent years. 

OUTLOOK    

Other state-run gas distributors that may be put up for sale in the short or medium term in Brazil include Copel’s Compagás, in Paraná state, and Gasmig, in case Minas Gerais holding Cemig is privatized.