The Petrobras Board of Directors has approved the sale of the Landulpho Alves refinery (RLAM) in São Francisco do Conde, Bahia, Brazil, and its associated logistical assets for Mubadala Capital for the amount of US$1.65 billion (about R$9.1 billion).
The agreement provides for adjustments in the sale value due to changes in working capital, net debt and investments until the closing of the transaction, and that the transaction is subject to the fulfilment of precedent conditions, such as approval by the Administrative Council for Economic Defence (WHERE).
The refinery will be the first of the eight that are in the sale process to have the contract signed. The sale of RLAM is in line with Resolution No. 9/2019 of the National Energy Policy Council, which established guidelines for the promotion of free competition in refining activity in the country, and is part of the commitment signed by Petrobras with CADE for the opening refining sector in Brazil.
After the sale of the eight refineries, Petrobras will remain with a refining capacity of 1.15 million bpd, with a focus on producing more efficient and sustainable fuels. To this end, Petrobras will invest in technologies to make its refineries doubly resilient, both from an environmental and an economic point of view. The projection is to double in 5 years the supply in these refineries of diesel S-10, of lower emission, and at increasingly competitive costs.
The RLAM divestment process, approved by the Petrobras Board of Directors, started in May 2019 and strictly followed the divestment system approved by the Federal Court of Accounts (TCU). The RLAM divestment project had its approval recommended by the Internal Disposal Commission and was approved in all instances of Petrobras' corporate governance, from the Statutory Technical Committee formed by executive managers from different areas of the company, through the Executive Board. In these last two instances, he received unanimous approval. Several previous meetings were held with such bodies, including the Investment Committee, which advises the Board of Directors.
The divestment of RLAM also featured fairness opinions from Citibank, Rotschild and Santander banks, technical advice from the global consultancy IHS-Markit and Fundação Getulio Vargas and legal advice from Dr Francisco Costa e Silva, former chairman of the Securities Commission Securities and specialist in Corporate Law.
Petrobras released the teaser for the sale of the refinery in June 2019. In February 2021, a proposal of US$1.65 billion was received. It is important to highlight that in all asset sale processes, including that of RLAM, Petrobras establishes a value range that guides the transaction and that considers the technical characteristics, productivity and the potential to generate value of the asset in different corporate planning scenarios. These scenarios are used in both investment and divestment decisions and consist of projections of the main variables, such as Brent oil price, refining margins and exchange rate (Real/Dollar). These premises are approved annually by the Board of Directors in conjunction with the strategic plan.
Roberto Castello Branco, president of Petrobras, highlighted the importance of the operation: “Today is a very happy day for Petrobras and Brazil. It is the beginning of the end of a monopoly in an economy still with monopolies in various activities. The divestment of RLAM contributes to the improvement of capital allocation, reduction of the still high indebtedness and to initiate a process of reducing the risks of political interventions in fuel pricing, which caused so many losses for Petrobras and for the Brazilian economy itself. Petrobras is not innovating, since, for more than a decade, large private oil companies in the world have been alienating a significant portion of their refining capacity, in the pursuit of maximising the return on their capital.”
“Oscar Fahlgren, executive director of Mubadala Capital in Brazil, also commented: “We believe that RLAM can become a guiding thread for new investments in the energy value chain, generating positive impacts for the sector, society and the regional economy. Our initial priority is to maintain excellent management at RLAM and the competitive regional production and supply of refined products, and subsequently we plan to maximise the use of RLAM's assets and all of its installed capacity, investing in expansion and improvement projects. We believe that, upon the conclusion of our investment in RLAM, we will be able to attract global business partners to the sector, multiplying the positive impact generated.”
Read the article online at: https://www.hydrocarbonengineering.com/refining/29032021/petrobras-approves-sale-of-rlam-refinery/