Brastec Receives Capital Injection of R$70m from Modal FIP Oil and Gas Fund - Offshore Technology | Oil and Gas News and Market Analysis
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Brastec Receives Capital Injection of R$70m from Modal FIP Oil and Gas Fund

As part of its plan to increase acquisitions and investments required for oil exploration in the pre-salt layer, Brastec Technologies, one of the main national manufacturers of engineering and equipment for oil and gas industry, has entered into an agreement to receive a capital injection of R$70m. Resources shall be invested by the private equity fund of the Modal Bank, which is to hold a minority share in the capital of the company – the percentage of which was not revealed.

Headquartered in Jundiaí (SP), Brastec Technologies was founded just over ten years ago by Italian Fabio Romano, originally as a manufacturer of fiber optic cables. The great leap of the company occurred in 2004 when it delivered the first major project in the oil and gas market at the request of a large international player in the segment, which at that time entered the Brazilian flexible pipe market.

Driven by the growth of the industry, Brastec presented an average annual growth rate of 40% over the past five years. Capitalised, the expectation of the company is to close 2011 with revenues of R$70m and double that amount next year.

Mr. Romano explains that with the new partner, the company intends to become a platform for consolidation, with acquisitions of competitors both nationally and abroad. The executive also sees potential for ‘conglomeration’ in the segment by acquiring participations in companies that operate in segments close to Brastec.

"If the project becomes reality, probably we will need additional sources of resources," he says. He explains that currently an IPO with a stock offering on the stock market is not yet planned.

In addition to acquisitions, the proceeds of the capital injection shall be used to accelerate investments in research and technology development required to meet the demands of pre-salt.

"The technology for extracting oil and gas is not yet ready," highlights Romano.

Brastec aims to develop specialised equipment together with its customers, which are companies that provide specific services to oil companies. These supplies would be in line with the requirement of national content provided for in the regulatory framework in the industry.

It is estimated that only Petrobras responds for half of the global demand for flexible pipes, which pass through the oil and gas extracted from oil basin. Romano highlights, however, that its revenues do not depend on the state-owned company.

The negotiations for the injection of capital took approximately one year. The investment in Brastec is the second of Modal’s FIP Oil and Gas. With R$500m in resources, the private equity has as main quota holders the BNDES and pension funds such as Petros, Funcef and CEEE Foundation – also invested in Enesa Engenharia.

The idea is that the FIP fund makes between five and eight investments, according to John Michael Streithorst, a partner who is responsible for Modal’s private equity fund. Since last year, the fund managers evaluated approximately 1,200 companies, within a total universe of approximately 5,500.

"The national companies face a great challenge to meet the expected demand for the pre-salt," explains Streithorst.

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