Cosan creates new venture in power and natural gas
In line with significant changes taking place in Brazil's oil and gas market, renewable fuel producer Cosan has gathered assets and projects in electricity and natural gas under a new business, Compass Gás e Energia. Compass will invest in electricity and gas projects already being prepared by Cosan and incorporate existing operations, including Comgás and Compass Comercializadora, purchased last year."Cosan contributed these assets to the new company," Comgás CEO Nelson Gomes said. He is accumulating the new company's command. The new venture, announced Monday during the company's investor day, shows how the group is betting on the New Gas Market, a government program to liberalize the market in a similar way to what was done to electricity. However, the moment is turbulent. A steep drop in oil prices and the even stronger dollar against the real could affect plans to sell Petrobras assets and influence the timeline and costs of energy projects.
Cosan CEO Marcos Lutz said the oil's current plunge is "excessive" given production costs around the world. "There shouldn't be a structural decline of this size and magnitude. On the other hand, the exchange rate's change could be more structural," he said.
When it comes to infrastructure, Compass is born with two projects already in the licensing stages: Route 4, a gas pipeline bringing pre-salt gas to the continent, and a liquefied natural gas (LNG) import terminal on the coast of São Paulo. As for distribution, the new company will operate through Comgás and seek to expand in the Southeast and other Brazilian regions. Until 2024, when the current regulatory cycle ends, the São Paulo-based gas distributor should invest about R$900 million a year.
"Compass will ensure the execution of Comgas's regulatory plan and selectively look at some acquisition opportunities through privatization that will appear in the country," Mr. Gomes said. The executive added that Compass has to look at all distribution assets being put up for sale "by default," and there is no specific target from the start.
Such variables as geographic location, volume and equity picture will define interest on the asset and proximity with São Paulo, the area where Comgás operates, is a factor that will be taken into account. "We could be minority shareholders, it will depend on the shareholders' agreement," he said, adding that the strategy will be defined as asset sales are announced.
As for electricity generation, the focus is on...
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