Petro­bras needs cash in­jec­tion of up to $26b

The Pak Banker - - COM­PA­NIES/BOSS -

Brazil's state-run oil pro­ducer Petro­bras needs a cap­i­tal in­jec­tion of as much as 100 bil­lion reais ($25.5 bil­lion) to bal­ance its fi­nances, even if it takes three years to com­plete, said Luiz Fer­nando Figueiredo a for­mer cen­tral bank di­rec­tor and Chief Ex­ec­u­tive Of­fi­cer of Maua Cap­i­tal. "Every­one knows that Petro­bras needs to be cap­i­tal­ized at some mo­ment, and ev­ery day that passes this gets more ex­pen­sive," Figueiredo said Tues­day at an event in Sao Paulo or­ga­nized by Bloomberg and the cap­i­tal mar­kets as­so­ci­a­tion known as An­bima. "It needs a cap­i­tal­iza­tion soon, even if it is a plan for the next one, two or three years."

The in­jec­tion could be done by de­vel­op­ment bank BN­DES, which is al­ready a share­holder, he said. While Rio de Janeiro-based Petro­bras is mak­ing ef­forts to cut costs amid the low oil price en­vi­ron­ment that has made many of its projects un­eco­nom­i­cal, this hasn't been enough to lower its enor­mous debt load and re­duce lever­age, Figueiredo said. Petroleo Brasileiro SA saw its lever­age ex­plode dur­ing the com­modi­ties boom when it bor­rowed heav­ily to ex­pand oil pro­duc­tion into deeper wa­ters of the At­lantic Ocean and build re­fin­ery projects that went over bud­get. It then be­came the fo­cus of Brazil's big­gest cor­rup­tion scan­dal known as Car­wash. The com­pany's re­fin­ing di­vi­sion also lost tens of bil­lions of dol­lars dur­ing the com­modi­ties boom be­cause it was sub­si­diz­ing fuel im­ports as part of a wider gov­ern­ment ef­fort to curb in­fla­tion. Petro­bras and BN­DES didn't im­me­di­ately re­spond to a re­quest for com­ment on the pos­si­bil­ity of a cap­i­tal­iza­tion. In Jan­uary, Brazil­ian Pres­i­dent Dilma Rouss­eff said her ad­min­is­tra­tion would be will­ing to eval­u­ate fi­nan­cial as­sis­tance to the state oil com­pany.

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