Why Brazil’s Energisa has bought yet another gas distribution utility

The acquisition of 100% of Infra Gás e Energia by Energisa qualifies the latter to become a key operator of natural gas distribution in Brazil’s northeast region, local analysts told BNamericas. 

Purchased for 890mn reais (US$174mn), Infra Gás e Energia has a promissory share purchase agreement with Compass Gás e Energia for the acquisition of stock representing 51% of Norgás' total and voting share capital, a transaction scheduled to be concluded on July 22, 2024. 

Norgás is a holding company formed in October 2023 from the partial spinoff of Commit Gás (formerly Gaspetro), a company formed by Compass and Japan's Mitsui, which holds the remaining 49% of Norgás.   

The company holds minority stakes in the gas distributors in Ceará (Cegás), Alagoas (Algás), Sergipe (Sergás) and Pernambuco (Copergás) states, and a majority stake in the concessionaire in Rio Grande do Norte (Potigás). 

Source: Energisa

An important electric power distribution company in Brazil, Energisa entered the natural gas market in 2023 through the acquisition of Espírito Santo state’s ES Gás.  

“In any potential privatization moves made by governments in the northeast, Energisa will certainly be positioned to lead this consolidation and become a large-scale operator, especially in this region,” Rivaldo Moreira Neto, CEO of the Gas Energy consultancy, told BNamericas.  

Most of the country’s gas distribution utilities are still controlled by state governments – the exceptions are Rio de Janeiro, São Paulo, Espírito Santo and Rio Grande do Sul states. 

For Moreira Neto, the transaction increases the diversity of players with experience in distribution. 

"In the case of Energisa, with the additional contribution of very extensive and successful experience in the electricity sector," he said.

Afonso Gomes, president of the regional economic council of the second region (CoreconSP), said that Energisa is betting on the privatization of these various companies in order to acquire a controlling stake. 

"It's a good path for Energisa to take. It's better to be a minority shareholder and possibly even leave the company if you think it wasn't worth it than to already be the majority shareholder with all the weight of the strategic and operational management of the companies," he told BNamericas.

During a presentation on Monday, Energia highlighted that it will have the preferential purchase right in eventual sale processes involving the gas distributors where it holds interests. 

Among potential synergies identified by the group are biomethane, green hydrogen and small-scale LNG projects, as well as new business opportunities in mature fields, such as gas storage and carbon capture, utilization and storage (CCUS). 

The company intends to accelerate investment in expanding the piped gas grid of distributors in the northeast. 

"In our assessment, given the limited [piped gas] grid coverage in the regions and the existence of significant potential to be captured from the market, there's space in rates for accelerated expansion of the asset base and, consequently, growth of these companies without impacting competitiveness," said Energisa CEO, Ricardo Botelho.

Fitch Ratings considered the acquisition of Infra Gás e Energia to be neutral for Energisa's credit quality

"The acquisition increases Energisa's business diversification as the group expands its operations in the natural gas distribution sector, characterized by a moderate risk profile and strong growth prospects," the rating agency said in a statement. 

“Fitch believes that Energisa has proven financial flexibility and that the outlay for the acquisition will represent a manageable effort in terms of liquidity.”