Peruvian government launches lifeline of US1,000 million to Petroperú

Very serious situation in Petroperú. In addition to the US1,000 million that the MEF has transferred that are not returned, they have approved a credit line of US500 million that must be granted by the Banco de la Nación. Everything has been approved by DU and not by law. If we add the initial US750 million, the forado has been US2,250 million”.

Luis Alberto Arias, economist

The announcement of the lifeline to Petroperú by the Peruvian government came true, and the state oil company already has an additional 4,000 million soles (about 1,000 million dollars) in its assets, a measure planned by the Peruvian government given to sustain the financial capacity of the public company and maintain financial operations.

The measure was issued under an Emergency Decree No. 023-2022 in which an additional 4,000 million soles are available from the freely available balances of the public Treasury, that is, resources not yet allocated for other purposes. The reason given by the Government is to avoid fuel shortages, but this is derived from the reduction in Fitch’s credit rating (from BBB- to BB+) at the beginning of last September, which generated a loss of the Investment Grade and produced Greater uncertainty in the renewal of Petroperú’s lines of credit.

Fitch explained that this decision is made due to a weakening in Petroperú’s liquidity, persistently high leverage, insufficient government support and uncertainty related to its ability to maintain its credit lines.

On that occasion, Petroperú publicly disclosed in its unaudited financial statements a cash position of 32 million dollars, as of June 30, 2022, which Fitch considers inadequate.

It should be noted that in May of this year the Ministry of Economy and Finance (MEF) had already lent 750 million dollars to Petroperú to maintain the company’s liquidity.

Line of credits for purchases

In addition to the capital contribution, a short-term debt operation is available as a guarantee for a line of credit of up to 500 million dollars for import operations of crude oil, fuels, derivatives and others such as biodiesel.

The guarantee is for operations contracted with the Banco de la Nación, as detailed in the measure; and the guarantee term is for one year. But the Peruvian government not only approved the lifeline for Petroperú, but also ordered to start its restructuring and the sale of the shares.

In the case of the restructuring of Petroperú, a 90-day term has been set to hire a consultant to present a Restructuring Plan for the governance and financial sustainability of the state company. The plan must be presented to the Board of Shareholders (Ministry of Economy and Ministry of Energy and Mines) no later than July 31 of next year. On the other hand, there are other additional commitments derived from the loans, such as having a maximum of four months to ensure inventories for fuel supply; a plan of annual and five-year objectives.

Sale of shares

In addition, the Government has established a term of 12 months for the valuation of Petroperú shares through a Public Offering of Shares, within the framework of Law No. 30130. In recent days, a shortage of some fuels at various points in the Peruvian capital and throughout the country. Petroperú has about half of the fuel trading market.