A $2,8 billion shock
Portuguese company Galp is preparing a multi-billion dollar capital injection for its Brazilian energy subsidiary.
A multi-billion dollar operation is underway in the Brazilian energy sector. Galp Energia, an oil company controlled by Portuguese investors, announced on Monday that it plans to raise approximately €2 billion, equivalent to US$2,8 billion, for its Brazilian subsidiary. The capital increase is scheduled for the second half of 2011, the company informed the market in a statement. "To strengthen its capital structure, Galp announces that it has initiated a capital increase process in its Brazilian subsidiary...which should be completed in the second half of 2011," the text stated. Galp has stakes in important Brazilian oil reserves, including a 10% stake in the Lula field (formerly Tupi), in the Santos Basin.
Analysts and investors have doubts about whether the company has the capacity to finance the multi-billion dollar oil exploration projects in Brazil. This distrust increased after the company revealed that it estimates investments of 3,5 billion euros between 2012 and 2025. The expenditure for this year is projected to be between 1,2 billion and 1,5 billion euros.
The announcement coincides with a presentation the company is giving to market analysts in Rio de Janeiro this Monday. The information reinforces the importance of Brazil for Portuguese capitalism. With a population of around 10 million and a mature domestic market, Portuguese companies depend on the external market to continue growing. And Brazil has been a preferred destination for this capital. Last year, Portugal Telecom bought part of Oi, after selling its stake in the operator Vivo to Telefónica. This was the way they found to maintain their position in the Brazilian market. Other Iberian companies maintain the same interest. At the end of 2010, the Spanish company Repsol carried out a capital increase in its Brazilian subsidiary amounting to US$7,11 billion.