Cemig to OK Gasmig Sale by End-May

The board of Brazil's Minas Gerais state-integrated power company Cemig is scheduled to approve the sale of a stake in its natural gas distribution unit Gasmig to federal energy company Petrobras by month-end, Cemig chairman and Minas Gerais state development secretary Wilson Brumer told analysts Friday.

"The [Minas Gerais] government signed the letter of intent with Petrobras yesterday [Thursday], next week we should meet with [mines and energy minister] Dilma Rousseff to determine an investment schedule and by the end of May the board should approve it," Brumer said. "In 30 days we hope to conclude the transaction."

Through the agreement, the Minas Gerais government would hand over a non-controlling stake in Gasmig to Petrobras' gas subsidiary Gaspetro in exchange for US$460mn investments to expand the state's gas pipeline network.

"This is an area of investment which is not Cemig's core business - we have other investments to carry out and it will be good business for Gaspetro," Brumer said.

Minas Gerais state, a leading industrial region in Brazil, consumes about 3.1 million cubic meters a day (mcm/d) of natural gas and has a potential demand estimated at 11mcm/d by 2010. The main markets for gas are industry and vehicular natural gas (VNG), although Gasmig should sell some of the gas for power generation to the 225MW Ibirité plant and through a take-or-pay contract with CFLCL's 250MW Juiz da Fora thermoelectric project, Brumer said.

Among possible future clients is Brazilian fertilizer maker Fosfertil, which is planning to build a urea plant in the state which will have future gas consumption of 2mcm/d, Brumer said. Gasmig also plans to supply gas to steel companies in the region to replace the use of heavy diesel as fuel.

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