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32 Americas and Global LNG
Brazil continued
COMGÁS
Summary of Comgás 2008 results:
• 6% increase in the total volume of
gas sales to 5.3 bcm;
• 10% increase in residential customers;
• 4% increase in commercial customers; and
• 449 kilometres of network expansion.
BG Group has a 60.1% majority interest in
Comgás, Brazil’s largest gas distribution
company. Comgás is listed on the São Paulo
stock exchange.
At end 2008, Comgás had 5 704 kilometres
of pipelines covering 67 municipalities
and supplied gas to 1 004 industrial,
8 885 commercial and 620 191 residential
customers in the state of São Paulo.
Additionally, Comgás supplied 401 NGV
filling stations, 20 customers in co-generation
and two in the thermo-generation market.
Comgás has increased its average daily
volume from 3.0 mmcmd in 1999 to
14.6 mmcmd in 2008.
In 2008, Comgás’ operating profit was
£115 million (2007 £211 million) and volumes
increased by 6%. A strong underlying
performance was obscured by a significant
increase in the cost of gas. Regulatory
mechanisms allow the higher cost of gas
incurred by Comgás to be passed through
to customers in future periods. At the end
of 2008, the balance of gas costs to be
recovered in 2009 and 2010 was £161 million.
Excluding the impact of the timing effect
of increased cost of gas at Comgás, the
operating profit increased by 15% in 2008,
reflecting volume growth and better margin
performance at Comgás.
The Comgás concession is a 30-year franchise,
with a potential for a further 20 years.
The concession area contains 7.7 million
households and is in the industrial heartland
of Brazil, accounting for about 25% of Brazil’s
GDP. The current business focus continues
to be the connection of higher-margin
commercial and residential customers.
The concession contract requires a tariff
review every five years. Since privatisation
in 1999, Comgás has invested more than
BRL 2.9 billion. In May 2009, the regulator,
ARSESP, published the details of the final
outcome of Comgás’ tariff review covering
the period 2009-2014. The tariff review
resulted in some reductions in Comgás’
margins, mainly reflecting the pass through
of reduced cost of gas seen in the last six
months and some reduction of the
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maximum allowed margin. As a result of
the reduction, competitiveness of natural
gas is expected to improve.
Comgás purchases gas at prices indexed to
a basket of oil-related fuels. Brazilian gas
supplies from Petrobras of 3.5 mmcmd are
contracted until December 2012. Bolivian gas
supplies from Petrobras began in July 1999
under a 20-year contract, with volume
increasing from 4.0 mmcmd in 1999 to
8.7 mmcmd in 2007, and they are contracted
until July 2019. Comgás has two further
gas supply contracts with Petrobras: a firm
energy contract (1.0 mmcmd until December
2012) and an interruptible contract (up to
1.5 mmcmd until December 2010).
In May 2008, a new supply agreement
for 0.65 mmcmd was agreed between
BG Group’s gas marketing arm, BG Comercio,
and Comgás to replace an earlier agreement
that needed to be restructured as a result of
changes to the Bolivian regulatory regime.
In 2009, industrial and commercial demand
reduced due to the fall in economic activity
and high rainfall benefiting competing
hydro electric generation. The residential
segment continues to add connections.
Growth in the industrial and commercial
segments is expected to resume as the
economic outlook improves.
Effective shareholders Comgás (%)
6
5
4
3
2
1
0
BG Group 60.1
Public 21.8
Shell 18.1
Comgás volumes (bcm)
Thermal
Co-generation
NGV
Commercial
Residential
Industrial
4.8
2006
5.0
2007
5.3
2008
Financial and operating summary – Comgás
2008 2007 2006
Revenue
(£ million)
EBIT
1 206 810 739
(£ million)
Customers at
115 211 186
year end (‘000)
Sales volume
630 572 517
(bcm) 5.3 5.0 4.8