2008-05-08 23:56:11 -
- Fitch Ratings has today affirmed both the foreign currency and local currency Issuer Default Ratings (IDR) of Petrobras Energia S.A. (PESA, formerly Pecom Energia S.A.) at 'BB.' In addition, Fitch has affirmed PESA's National Scale rating at 'AA+(Arg)'. The Rating Outlook for all IDRs is Stable. The following issuances are affirmed at 'BB':
--Senior unsecured notes due 2009;
--Senior unsecured notes due 2010;
--Senior unsecured notes due 2011;
--Senior unsecured notes due 2013;
Guaranteed notes due 2017 at 'BBB-'.
PESA's ratings reflect support from the company's majority shareholder, Petrobras Brasileiro (Petrobras), which has a foreign currency IDR of 'BBB-' by Fitch. PESA is a strategic asset for Petrobras contributing to the diversification of Petrobras' international operations in Latin America. It will continue to benefit from Petrobras' leadership position in both upstream and downstream operations and consumer brand name awareness. In addition, PESA benefits from technology sharing in the exploration and production segment with Petrobras. PESA's unsecured foreign and local currency IDRs, as well as notes due in 2009, 2010, 2011 and 2013, are rated two notches above the 'B+' country ceiling of Argentina due to a number of factors. These factors include the PESA's strategic importance to Petrobras, its potential to keep dollars abroad via exports, plus its ability to borrow against the assets it owns outside of Argentina.
On a stand-alone basis, PESA's ratings are supported by solid credit metrics, an integrated business profile, and proven hard currency generating ability. Its credit ratings are constrained by the high business risk associated with operating in Argentina; profits are limited by price controls, export taxes and high government intervention in the energy sector. PESA has not been able to benefit from high crude prices. Increasing inflation has eroded sales gains and has increased the company's cost structure. Macroeconomic concerns and government intervention in the Argentine energy sector are not likely to be resolved in the near term.
PESA also has operations in Peru, Ecuador, Venezuela and Bolivia. Both the Venezuelan and Bolivian operations have had to restructure their operating agreements with both governments. These restructurings have resulted in reduced crude oil production for PESA. In Argentina, PESA's crude oil production has decreased due to the natural decline of mature fields. The combination of reduced crude oil production, higher lifting costs, and increased cost structures across the petrochemical and refining segments resulted in a 29% decrease in fiscal year 2007 operating income.
Positively, PESA is one of the low cost producers in Argentina with a competitive cost structure. At Dec. 31, 2007, net debt-to-EBITDA was 2.2 times (x), and EBITDA-to-interest expense was 4.7x. While PESA operates fairly autonomously, it benefits from the financial strength of its majority shareholder, Petrobras. PESA has ready access to the international capital markets; such support from its majority shareholder adds another dimension to its financial flexibility.
PESA is a vertically integrated oil and gas company in Argentina engaged in exploration, production, refining, and transportation of hydrocarbon products. PESA also is involved in the development of petrochemicals, electricity generation and electricity distribution in Argentina. PESA's majority shareholder is Petrobras Brasileiro S.A. (FC IDR rated 'BBB-' by Fitch) with a 67.2% direct and indirect interest in PESA.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Fitch Ratings
Gianna Bern, +1-312-368-3217 (Chicago)
Cecilia Minguillon, +5411-5235-8123 (Buenos Aires)
Christopher Kimble, +1-212-908-0226
(Media Relations, New York)
