RIO DE JANEIRO (Reuters) – US-based New Fortress Energy Inc said on Wednesday it would buy natural gas company Hygo Energy Transition Ltd for $ 2.18 billion to expand its presence in Brazil, the frontier for growth in the burgeoning liquefied natural gas market. developing.
New Fortress, an energy infrastructure company, is among the private sector players turning their sights to Brazil, where demand for super-cooled LNG is increasing, although the market is smaller than in India and China, where power generation is shifting away from more coal. dirty to natural gas.
With Brazil opening up its natural gas industry to private investors, other companies including oil major BP PLC and US-based EIG Global Partners are also planning multibillion-dollar investments in the country.
New Fortress, a growing competitor in the LNG industry, has a small liquefaction plant in Florida and ships LNG throughout the Caribbean. In the past year, its market value has jumped 286% to $ 10 billion, according to Refinitiv Eikon data. The company is building a larger LNG import terminal in Mexico.
The company will acquire all of Hygo’s outstanding shares for 31.4 million shares of NFE Class A common stock and $ 580 million in cash.
Brazil’s annual demand for LNG is expected to grow by more than 80% by 2021, the fastest rate in the world, although its starting point is relatively low compared to large Asian consumers, said Kristen Holmquist, forecasting specialist at Poten & Partners.
Unlike these countries, most of Brazil’s electricity comes from hydropower. This LNG supply is partly intended to replace the supply of natural gas from pipelines originating from Bolivia.
Hygo transports supercooled fuel and has become a key player in Brazil’s natural gas industry as state-controlled Petrobras sells assets, canceling what was almost a monopoly on the market.
Hygo – a 50-50% joint venture between US private equity firm Stonepeak Infrastructure Partners and Golar LNG – has recently invested in a number of LNG projects in Brazil for power generation. The company is also competing to operate a highly desirable LNG import terminal which is leased by Petrobras.
“There is strong growth in Brazil for electricity-powered projects,” Holmquist said in a webinar on Wednesday.
Hygo has told Reuters in 2020 that it plans to use LNG instead of diesel in trucks.
The transaction has a corporate value of $ 3.1 billion and an equity value of $ 2.18 billion, according to the statement.
The Hygo acquisition comes four months after the company’s trading debut in New York was suspended at the last minute after Brazilian federal prosecutors said the then company’s chief executive was appointed in the early stages of a corruption investigation, to activity at the company previously.
The CEO at the time, Eduardo Antonello, had left the company. He hasn’t been charged.
New Fortress also agreed to buy Hygo’s controlling company, Golar LNG Partners LP for about $ 251 million in general equity value and a company value of $ 1.9 billion.
Golar LNG Ltd was up 15% in US trading, while New Fortress Energy was up 10%.
Reporting by Sabrina Valle and Rithika Krishna; Edited by Maju Samuel, Krishna Chandra Eluri, Steve Orlofsky and David Gegoryo