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Peru puts up hurdle in Brookfield pipeline deal

The country’s finance minister said Peru would withhold Odebrecht’s revenues from any pipeline sale, according to reports.

Odebrecht, a Brazilian construction conglomerate facing massive penalties over past corruption charges, may be facing government resistance in its attempt to sell off its assets in Peru.

Talks between Brookfield Asset Management and Odebrecht over the latter’s sale of a majority stake in a $5.2 billion gas pipeline in Peru – reported by Reuters, though not confirmed by either party – may be impacted, as the country’s finance minister reportedly told local television that Peru would withhold any money the company might make from selling the pipeline.

Last month, Odebrecht pled guilty to corruption-related charges in US federal court, agreeing to pay between $2.6 and $4.5 billion in penalties after reaching an agreement with US, Swiss and Brazilian authorities over bribery payments made to Brazilian politicians and the state-controlled oil company Petrobras. Odebrecht has apologised for “its participation in illicit actions in its business activities” and vowed to reform.

The firm had reportedly been on the verge of a deal to sell its 55 percent stake in the pipeline to Sempra Energy, but that deal fell through when the government refused to strip an anti-corruption clause from the contract.

Brookfield declined to comment on the pipeline deal, while Odebrecht would not discuss the talks but said it is cooperating with anti-corruption investigations.

“The negotiations for the sale of this asset are reserved and Odebrecht will not position itself,” an Odebrecht spokeswoman told Infrastructure Investor. “Odebrecht Peru confirms the signing of a cooperation agreement with the Public Ministry of that country and reaffirms its commitment to support the ongoing investigations.”

While some investors have shied away from the South American market in the wake of the Petrobras scandal, Brookfield has touted what it calls a “contrarian view”, seeing enormous potential in an emerging market. In September, Brookfield acquired a majority stake in the Nova Transportadora do Sudeste pipeline in Brazil from Petrobras, investing $5.2 billion.

Brookfield has acquired a number of infrastructure assets from Odebrecht in the past year, most recently agreeing to purchase a share of the Olmos irrigation project in Peru for an undisclosed sum.