CIC-led group buys stake in Brazil pipeline

An investment consortium led by sovereign wealth fund China Investment Corp has acquired a majority stake in a natural gas pipeline unit from Brazil's state oil company Petrobras SA.

CIC said on Wednesday it had－jointly with Canada's Brookfield Asset Management Inc and other institutional investors－acquired 90 percent stake in Nova Transportadora do Sudeste SA from Petrobras, which controls a natural gas transmission asset in southeast Brazil.

The statement did not reveal the value of the transaction.

Reuters reported in September that Petrobras agreed to sell 90 percent of its natural gas pipeline unit to a group of investors for $5.2 billion.

Analysts said that the deal showed the desire of the sovereign wealth fund to diversify its investment portfolios by acquiring overseas resources and infrastructure assets.

"The deal has a very positive implication in terms of diversifying and safeguarding energy sources through overseas equity investments," said Wu Libo, deputy director at the Center for Energy Economics and Strategy Studies of Fudan University in Shanghai.

Wu, however, cautioned about potential risks for the investment, such as uncertainties over future price trends of natural gas, local government restrictions on energy trading as well as local environmental standards and policies on natural gas extraction.

CIC, with total asset exceeding $810 billion at the end of 2015, reported a loss on its overseas investments that year, with net investment returns falling to a negative 2.96 percent from a positive 5.47 percent in 2014.

Li Li, energy research director at ICIS China, a consulting company that provides analysis of China's energy market, said the Brazilian gas deal underscored the continued trend of the sovereign wealth fund seeking alternative investment opportunities.

"In the past, the main buyers were the Chinese energy companies that tried to acquire overseas assets in the upstream or downstream industries," Li said.

"But now we are seeing more and more Chinese investment companies buying such assets to seek reasonable returns."