May 28, 2019 / 11:49 AM / a month ago

Brazil's top court set to decide on Petrobras divestments Thursday

BRASILIA/RIO DE JANEIRO, May 28 (Reuters) - Brazil’s Supreme Court is set to issue on Thursday a key decision that could hold up billions of dollars of divestments by oil company Petroleo Brasileiro SA and other state-run firms.

Dias Toffoli, the president of the Supreme Court, known as the STF, has included in the court’s Thursday agenda a discussion of whether some privatizations by state-run firms need congressional approval and need to be carried out via an auction.

If the court decides that those requirements must be met, it could throw into flux major planned sales by Petrobras, as the company is widely known, such as the sale of eight refineries, which it said could fetch some $15 billion, and the sale of its Araucaria Nitrogenos fertilizer unit. It would also hold up the sale of Petrobras’ TAG gas pipeline unit, which it agreed to sell to France’s Engie SA in April for $8.6 billion.

In June 2018, Supreme Court Minister Ricardo Lewandowski issued a preliminary opinion saying the “sale of shares in public companies, of mixed capital firms and of subsidiaries requires previous legislative authorization.”

However, key asset sales later got the go-ahead from Brazil’s slightly lower Supreme Judicial Court, or STJ, and from Brazil’s solicitor-general.

On Monday, another STF minister, Edson Fachin, issued a decision upholding Lewandowski’s decision, calling the STJ decision contradictory. The decision, issued in response to a lawsuit brought by a union, concerns the TAG pipeline sale, but Petrobras’ upcoming divestments are also likely to be affected given their similarities to the TAG sale.

Fachin’s decision led Toffoli, the court president, to schedule the Thursday hearing.

Petrobras said in a statement that it was studying the Monday decision and would take actions to defend its interests. The firm stressed the importance of divestments in reducing its indebtedness.

Reporting by Gram Slattery Editing by Chizu Nomiyama

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