Sale of Gaspetro by Petrobras to Compass faces resistance from ANP

The billion-dollar agreement for the sale of Gaspetro by Petrobras to Compass, the gas and energy company of the Cosan group, has been facing resistance due to fears among authorities and specialists that the operation could allow a large concentration of the market in the hands of a single company.

Gaspetro is a holding company with stakes in 19 local natural gas distribution companies, and is on sale as part of government and Petrobras initiatives to open up the country’s gas sector, as a way to attract greater competition and more investment.

Compass signed a contract to acquire a 51% stake in Petrobras in Gaspetro in July, for around R$ 2 billion. The remaining 49% belong to Japan’s Mitsui.

“The purchase of Gaspetro by Compass certainly results in a verticalization that creates an asymmetry of market power. In this way, the role of (antitrust agency) Cade and the (regulator) ANP is to assess potential damage to competition and propose remedies”, said the professor at the PUC-Rio Energy Institute Edmar de Almeida.

The ANP recommended Cade to reject the sale operation and that the process be reopened, with the possibility of separate bids for the acquisition of participation in each state distributor of piped gas held by Gaspetro, allowing “a market structure more favorable to competition”.

The information was published the day before by the website of the newspaper Valor Econômico.

In its opinion, also seen by Reuters, the agency said that, given the shareholding control of Comgás by Compass, the percentage of influence over the total acquired by the distributors, in the eventual acquisition of Gaspetro, would reach 74.1% of the 87.8% that the distributors responded in the total of processed gas purchased in Brazil between January 2019 and August 2021.

“In other words, the influence of Compass in the acquisition of natural gas could account for up to 64.7% of the total volume of processed gas acquired in Brazil, considering the average in the aforementioned period,” said the agency.

For Almeida, “the ANP is playing its role, which is to ensure competition in the gas industry”. The specialist also highlighted that the separate sale would increase the number of participants and competition.

The ANP also pointed out that, with the possibility of separate bids, the other Gaspetro partners would have a longer period to make possible use of their preemptive rights with a view to acquiring equity interest in Gaspetro in the respective distributor.

If the operation is approved, the ANP highlighted the application of remedies as essential, such as the divestment of distributors whose purchasing power exceeds a certain threshold in the market.

It also defended, as a remedy, Compass’s commitment to act as a passive investor in Gaspetro, with the Cosan Group company, thus not electing members for the board of directors or executive officers or exercising significant influence over Gaspetro’s activities, as well as from enter into any contracts or agreements that regulate the exercise of voting rights.

Previously, the CMGN (Committee for Monitoring the Opening of the Natural Gas Market), created to monitor the opening of the gas market in the country and coordinated by the Ministry of Mines and Energy, had also defended that the consummation of the operation would present high risks of anti-competitive practices.

Cade informed that it has up to 240 days to complete the assessment of mergers, a period that can be extended for another 90 days, by reasoned decision of the Administrative Court of the municipality.

When contacted, Compass stated that “it trusts the technical analysis of Organs competent bodies and continues to work for a more open, competitive and competitive natural gas market”.

Petrobras said it would not comment.