Petrobras Approves US$3.2mn Conecta Purchase

The board of Brazil's federal energy company Petrobras (NYSE: PBR) has approved the US$3.2mn purchase of a 55% controlling stake in Uruguayan gas distributor Conecta from Spanish energy group Unión Fenosa, Petrobras said in a statement Tuesday.

Petrobras will buy Fenosa's subsidiaries Gaufil and Lufirel, which hold respective 30% and 25% stakes of Conecta voting capital. The other 45% remains in the hands of Uruguay's state oil company Ancap.

Petrobras aims to complete the purchase by Christmas, pending final approval from the other parties in the negotiations, Petrobras' regional manager for the Southern Cone, Décio Oddone, told BNamericas. The acquisition is still subject to the finalization of some operational requirements, the statement said.

"Petrobras' strategy is basically to act in an integrated way in the region's gas market. We have reserves in Argentina, Bolivia and the gas distribution market in Uruguay is just starting and we thought this was a good opportunity to have a position to be able to support the growth of the gas market in Uruguay," Oddone said.

Conecta owns a concession to distribute natural gas to small and medium size consumers through a 300km pipeline network in the interior of the country, and has exclusive rights for customers outside capital city Montevideo whose daily consumption is less than 5,000 cubic meters.

"The idea is invest in the network to be able to have more consumers so the consumption of gas distributed by the company can grow," Oddone said.

Petrobras does not have a concrete investment plan for Uruguay in 2005 yet, but "the idea is to invest in the network together with our partner Ancap and support the growth of distribution," he added.

Gaseba, controlled by Gaz de France, has the Montevideo gas distribution concession.

Conecta's 2004 earnings are forecast at US$2.7mn and this is expected to double in 2005, the statement said.

The company currently has 4,200 clients, of which 4,100 are residential. It is estimated that this number only represents 10% of the potential market, the statement said. Petrobras is still studying how many new clients it could add in 2005, Oddone said.

The move marks the beginning of Petrobras activities in Uruguay, meaning that the only South American countries in which it does not operate are Paraguay and Chile.

Uruguay's gas market is relatively young, "it does not have many years of gas distribution history, so we thought this was a good moment to come in and support its growth," Oddone said.

Uruguay imports gas from Argentina, "so the options in the short term are still Argentine options, but we think that in the future it could be possible that we have other options," he said. "The Uruguayan government is talking to Bolivia's government for a potential import of gas from Bolivia, and this interests us too," he added. "We have expectations to grow the gas distribution market for Conecta which means increasing imports because Uruguay is not a gas producer," Oddone said.

Petrobras ADRs on Wall Street were up 1.53% from Monday's close to US$39.24 by mid afternoon Tuesday.

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