According to the state oil company, the impact of the project would reduce the estimated EBITDA for 2024 by US$ 200 million.
Although the March 30 announcement that Petroperú's Talara Refinery would be closed for 90 days for repairs is a concern for the credit-risk agency, it does not affect the company's credit profile at this time, Fitch Ratings reported this morning.
According to the state oil company, the impact of this closure would reduce the estimated EBITDA for 2024 by US$200 million, which would drive leverage even above the 16.0x estimated by Fitch for 2024. This high level, deemed unsustainable by Fitch in its latest rating action commentary, has been incorporated into the company's standalone credit profile (SCP) of 'ccc-'.
In its report, Fitch stated that a further downgrade of the company's rating would be triggered by a deterioration in the government's unresolved liquidity situation, but clarified that this is not the case at this time. "While this development has a material impact on profitability and further deteriorates liquidity, the current SCP already reflects overleverage and insufficient liquidity absent government support," the rating agency stressed.
A further downgrade of Petroperú's SCP would place the company in the 'cc' rating category, which, according to Fitch's methodology, reflects of a probable default event.
However, this definition does not apply to Petroperú at this time, "given the Peruvian government’s incentives to maintain fuel supply to the country, thus preventing an event of default at the company. These incentives are reflected in the application of Fitch’s Government Related Entity Criteria, which links Petroperu’s SCP to the sovereign rating, and results in a Long-Term Issuer Default Rating (IDR) of ‘B+’ for the company," Fitch opines.
The Negative Outlook on the company's rating reflects not only the sovereign's outlook, but also uncertainty regarding the amount and timing of government support that Fitch believes the company requires.
According to the credit rating agency's estimates, taking into account the support already received earlier this year, the cash deficit would exceed US$100 million in 2024.
Fitch will continue to monitor the oil company's upcoming actions: timely repair of the FCK unit; tracking costs incurred; loss of income; the timeliness and significance of government support; and Petroperú's liquidity position.
"Petroperu’s liquidity remains tight. As of December 2023, the company reported US$ 64 million in cash on hand. However, it faces challenges to renew the revolving credit lines for up to US$ 1.3 billion that remains unavailable and under evaluation by different banks due to ESG concerns," concludes the Fitch report.
