EIG sees $750m financing as evidence of Brazil’s energy turnaround

The firm’s chief executive said EIG’s decision to invest in Brazil’s energy sector during years of turmoil is starting to pay off.

A port company backed by EIG Global Energy Partners has secured a $750 million loan from three development banks that will allow the completion of the first phase of a 3GW natural gas plant in Brazil.

The International Finance Corporation, Germany’s KfW and the Brazilian National Development Bank agreed to back the $1.1 billion project, according to a joint statement from Prumo Logistica and EIG.

Prumo Logistica, in which the Washington DC-based fund manager holds a controlling stake, is the lead sponsor of a $350 million equity commitment that also includes oil company BP and manufacturing giant Siemens.

Prumo, the private operator of the Port of Açu industrial complex, is developing the power plant Gas Natural Açu along with an LNG import facility in the form of a floating storage and re-gas unit, the statement said. Phase one of the project is expected to bring 1.7GW of power online by next March. Phase two has yet to secure financing but has long-term contracts in place.

The total project costs $2 billion and is expected to power up to 14 million households, the statement said. GNA has the licensed capacity to one day add an additional 3.4GW of capacity.

Blair Thomas, EIG’s chief executive, told Infrastructure Investor the $750 million financing is a sign that investor interest in Brazil’s energy market is returning after years of political and economic turmoil. After first investing in Prumo in 2013, Thomas said a lot of investors steered clear of Brazil as the country navigated a corruption scandal centred around the country’s national energy company Petrobras, as well as a recession and a drop in commodity prices.

Meanwhile, Thomas said, EIG maintained a “conviction” about the opportunity.

“When the downturn hit, we had a choice to make. We could either pull back and hunker down, or we could accelerate investment,” Thomas explained. “We invested right through the downturn, and it was in anticipation of where we are right now, which is that markets would turn and Brazil would start to get back in favour among the big international oil companies and energy players.”

EIG also announced three new board of directors at Prumo, including Pedro Parente, a former president of Petrobras, and Ieda Gomes, a former president of BP Brazil.

According to the statement, Açu is the largest port-energy-industry complex in Brazil and includes an oil hub, “strategically important for the export of pre-salt oil, as well as processing, blending and storage”. It is the only private terminal on the Brazilian coast, with 1.2 million bbl/day capacity, and the ability to receive Very Large Crude Carrier vessels. The company’s expansion projects include oil pipelines connected to the grid and 5.5 million bbl of storage and oil treatment facilities to serve growing export volumes, EIG and Prumo said.

EIG invested in Prumo and is funding the GNA investment through EIG Energy Fund XVI, which closed in 2013 on $6 billion. The firm is currently raising EIG Energy Fund XVII which is targeting $5 billion.