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Mubadala to raise $1.8 bn to buy a Petrobras refinery

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Abu Dhabi’s state-owned investment fund Mubadala began calling investors last week, pitching the sale of $1.8 billion worth of 10-year bonds to fund the acquisition of a Petrobras refinery in Brazil, Latin Finance reported citing a source involved in the deal.

MC Brazil, a Mubadala subsidiary, has hired JPMorgan, Bradesco BBI, HSBC, Société Génerale, Standard Chartered and USB as global coordinators and joint bookrunners along with Deutsche Bank as a another joint bookrunner, the source said.

Last month, Brazilian antitrust agency CADE approved the sale of  Refinaria Landulpho Alves, (RLAM) in the state of Bahia to Mubadala, according to a publication in the Federal Official Gazette. The deal was announced in March for $1.65 billion.

RLAM is the first of eight refineries placed on the market by Petrobras, Brazil’s state-owned oil and gas company. RLAM is one of Brazil’s oldest refineries and is also its third largest. It includes an integrated petrochemical complex, which is one of the largest in the southern hemisphere. RLAM represents half of Petrobras total 2.2mn b/d of domestic processing capacity.

CADE highlighted that the UAE investor does not operate in the refining sector in Brazil, which makes the transaction can be seen as pro-competition, “for generating de-concentration in the petroleum products sector”. The deal officially ends Petrobras’ monopoly in the refining segment.

Petrobras plans to operate the 333,000 b/d RLAM for 15 months after it is sold to Mubadala in the third quarter, Argus media reported. The Brazilian company expects its 2021-25 crude export portfolio to climb to 891,000 b/d from around 445,000 b/d in 2015-19, reflecting rising pre-salt production and the downstream divestments.

Petrobras chief executive Joaquim Silva e Luna in a congressional committee hearing on 25 June, said refinery sales, part of the company’s $25bn-$35bn divestment portfolio, will help finance pre-salt oil production and exploration campaigns in frontier basins in northern Brazil. The company
expects to sign sales contracts for six of the eight refineries by end-2021.

Petrobras chief executive Joaquim Silva e Luna
(Petrobras chief executive Joaquim Silva e Luna)

Brazil wants to use the refinery sales as a way to attract new investors to Latin America’s biggest economy’s downstream sector. Government officials are expecting increased competition across Brazil to result in lower fuel prices for consumers.

Petrobras (abbreviation of Petróleo Brasileiro S.A.) was founded in 1953 and is one of the largest producers of oil and gas in the world, primarily engaged in exploration and production, refining, energy generation and trading. Its headquarters are in Rio de Janeiro. The company has over 49,000 employees and more than 750.000 shareholders. The company was ranked #120 in the most recent Fortune Global 500 list. In the 2020 Forbes Global 2000, Petrobras was ranked as the 70th -largest public company in the world.

Mubadala, established in 20217 manages a diverse portfolio of assets and investments in the United Arab Emirates and abroad. With $232bn assets under management, is a business that spans six continents. The UAE-based fund has invested more than $2bn (Dh7.34bn) in Brazil in energy, infrastructure and other sectors as of 2019. Other international investments include stakes in Softbank‘s Vision Fund, Reliance Retail Ventures, Austria’s oil and gas entity OMV and petrochemicals companies Borealis and Nova Chemicals.