Brazil's BNDES to Offer Petrobras $10B for 2010

RIO DE JANEIRO (Dow Jones Newswires), Jan. 26, 2009

The Brazilian National Development Bank will play a large part in financing investments at state-run energy giant Petroleo Brasileiro (PBR), the company's chief financial officer said Monday.

According to Petrobras' Almir Barbassa, BNDES has guaranteed Petrobras access to $10 billion in financing for 2010. That's more than half of Petrobras' expected financing needs of between $18 billion and $19 billion, Barbassa said.

Petrobras expects to tap capital markets over the next two years -- with the first attempt likely later in the first quarter -- to raise the remaining $8 billion to $9 billion, Barbassa said.

"We'll need to raise $8 billion to $9 billion over the next two years, but that total could be reduced as costs decrease," Barbassa said.

BNDES is already playing a large part in Petrobras' 2009 financing needs of $18.1 billion. BNDES will loan the company $11.9 billion at a term of 30 years, with an additional $5 billion bridge loan coming from a consortium of international banks. The company plans to refinance the bridge loan over the next two years via capital markets.

Despite the volume of financing necessary, Barbassa's financing staff is ahead of the game, the executive emphasized. "The strategy was to have all of the 2009 financing needs guaranteed before the strategic plan was released," Barbassa said.

Barbassa also discarded any possibility the company was overreaching its debt limits. "The company is increasing its debt load; this is inevitable," Barbassa said. "But it's being done at healthy levels and not in an irresponsible way."

Barbassa said that the company's portfolio of projects, including the promising -- and expensive -- subsalt oil deposits, allowed the company to finance comfortably and cautiously.

Furthermore, Chief Executive Jose Sergio Gabrielli and other executives said they expected production and development costs to decline, reducing financing needs.

"We are seeing various indications that adjustments are happening in the entire supply chain, and we think there is going to have to be a global adjustment in costs," Gabrielli said.

"We know that costs are only now starting to capture the fall in the price of oil and should also decline," Gabrielli added.

Also in the company's favor was a conservative estimate for international oil prices, Gabrielli said. The company based its 2009-2013 strategic plan on 2009 Brent crude at an average of $37 a barrel in 2009. That's expected to rise to $40 a barrel and $45 a barrel through 2015. The company's price projections would yield cash flow of about $120 billion over the five-year plan, Barbassa said.

Meanwhile, Petrobras' services director Renato Duque said that the company would be aggressive in containing costs in an effort to lower the 2009-2013 strategic plan's price tag.

"New ways to do contracts are being studied. We are going to reduce order packages and the size of deals to promote greater competition," Duque said, adding that the company wants more participation from small and medium-size businesses in the tender process.

In addition, Petrobras will try to simplify its projects and utilize more uniformity -- including cloning platforms and other equipment across projects.  

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