Caracas weighs PdV successor, free of debt

Spanish Market: Coal, Crude oil, Electricity, Oil products, Petrochemicals
23/10/18

Venezuela's constituent assembly is proposing to replace state-owned oil company PdV with a new national energy company that would inherit everything but PdV's mounting debts.

The new company, tentatively called the Venezuelan Energy Corporation (CVE), would be tasked with developing export-oriented energy projects on its own and through joint ventures with foreign partners, says economist David Paravisini, who chairs the national constituent assembly's (ANC) petroleum, gas, energy and water subcommittee.

The ANC is a rubber-stamp body that Venezuela´s president Nicolas Maduro installed to replace the opposition-controlled national assembly in July 2017.

Under the proposal, CVE would absorb all of PdV's administrative, operational and physical assets, including PdV´s US refining subsidiary Citgo, but not its liabilities. These include debts owed to bondholders, joint venture partners, suppliers and other creditors.

PdV stopped paying interest and principal on all outstanding bond debt in September 2017 except for a $3.4bn PdV 2020 bond that is collateralized with 50.1pc of the shares in Citgo's indirect parent firm, Delaware-based PdV Holding. Combined PdV and government bond arrears currently total about $7bn.

Looming on 27 October is PdV´s obligation to pay over $950mn of principal and interest due on the 2020 bond. PdV assured bondholders last week that the payment would be made on schedule. In the meantime, Citgo, considered PdV´s most valuable asset, is subject to a separate lien by former Canadian mining firm Crystallex over an unpaid arbitration claim.

If PdV falls further behind on its debts, the CVE proposal could be a strategy to cushion the blow from the potential loss of Citgo and to spin off liabilities, possibly by formally declaring the bankruptcy or dissolution of PdV, a scenario that has been discussed in the international financial community for months.

A US-based financial sector executive close to bondholders tells Argus that the move would be "tossed out in any court outside of Venezuela" because a company cannot transfer all of its assets to a new entity without transferring the liabilities as well. "You can´t escape the debt in this way," the executive said.

According to an ANC official with direct knowledge of the proposal, "CVE's creation to replace PdV could be a new beginning for Venezuela's oil industry without the burdens of debt, corruption and deteriorated assets that currently characterize PdV. As CVE absorbs the country's energy companies and PdV is phased out gradually, its debts would be settled fairly as the company moves towards dissolution."

CVE would go beyond PdV to absorb the physical and human assets of other state-owned energy firms such as power utility Corpoelec, coal producer Carbozulia and petrochemicals manufacturer Pequiven. "CVE would be an integrated energy corporation, a single entity responsible for all of Venezuela's energy resources," the official told Argus.

The consolidated approach would eliminate administrative and management redundancies; concentrate financial resources; and centralize long-term strategic planning, project execution and procurement into a single entity, the ANC official said.

PdV was incorporated in 1975, a year before then-president Carlos Andres Perez nationalized Venezuela's historically foreign-owned oil and gas industry. The company has an estimated $22bn in liabilities, although precise data is unavailable because no 2017 external financial audit was conducted.

It is unclear if the CVE proposal is supported by the ANC's top leadership. ANC president Diosdado Cabello, who is widely viewed in Venezuela one of the three most powerful individuals in the ruling socialist party hierarchy alongside Maduro and economy vice president Tareck El Aissami, is currently overseeing a secretive process to draft a new constitution to replace the 1999 Bolivarian constitution authored by late president Hugo Chavez.

The Maduro government hopes to secure popular approval via referendum for its proposed constitutional reforms before 10 January 2019. The CVE's proposed creation could be part of those reforms.

A presidential palace official confirms that there is "some internal discussion" about creating a new company to replace PdV, adding that any such decision would require approval by the political factions headed by Maduro and his spouse Cilia Flores, Cabello and El Aissami.

The armed forces, which already have an industry foothold through the military-run Camimpeg oil, gas and mining company, also would play a major role in this decision, the palace official added.

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15/11/24

Cop: Granholm calls for more efforts if US quits Paris

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Cop: Korea’s Plagen plans Azeri green methanol plant

15/11/24

Cop: Korea’s Plagen plans Azeri green methanol plant

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Brazil starts US, Canada PE-dumping probe

14/11/24

Brazil starts US, Canada PE-dumping probe

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Latin America can harness energy transition: World Bank

14/11/24

Latin America can harness energy transition: World Bank

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Cop: German opposition pushes for Article 6

14/11/24

Cop: German opposition pushes for Article 6

Berlin, 14 November (Argus) — Germany's main opposition parties have welcomed the progress achieved on Article 6 of the Paris Agreement in at the UN Cop 29 climate summit in Baku, Azerbaijan. They have called on Germany and the EU to make better use of the instrument to allow for more cost-efficient climate action. Germany's dominant opposition party, the right-of-centre CDU/CSU, on 14 November commended the framework under Article 6 as an efficient way of reducing greenhouse gas (GHG) emissions. Article 6 of the Paris accord aims to help set rules on global carbon trade. The Article 6 mechanism allows for reductions to happen where they are quickest, cheapest and easiest to be carried out, the CDU head of the working group on climate action and energy, Andreas Jung, said in a debate in the lower house of parliament, the Bundestag. The deputy head of the FDP faction Lukas Koehler, also speaking in the Bundestag on 14 November, called on Germany and the EU to "finally" integrate the Article 6 in their climate action plans. Koehler argued that if for instance Germany's progress in emissions reduction should turn out to be too slow, the country could temporarily shift its efforts — and the associated finance — to where more rapid mitigation might be achieved, such as Brazil. The EU, of which Germany is a member state, will not make use of Article 6 credits, at least until 2030, to reach its so-called nationally determined contribution (NDC) – its climate action pledge — under the Paris climate accord. The EU has been seeing progress on ongoing Article 6 negotiations at Cop 29, the European Commission's principal advisor for international aspects of EU climate policy Jacob Werksman said today, "mostly because parties are now agreeing with the EU and others that were concerned about the transparency and accountability of the bilateral markets that operate under Article 6.2". Werksman believes there is enough momentum for negotiations to be concluded next week, noting that the atmosphere has "improved" compared with previous negotiations, which echoes the sentiment expressed by a number of negotiators earlier this week . Werksman pointed in particular to the US now agreeing with others and helping to broker compromises. Koehler also warned German government representatives in Baku to refrain from "expensive" pledges which may strain the country's budget. Developed countries agreed in 2009 to deliver $100bn/yr in climate finance to developing nations, and Cop 29 is focused on the next iteration of this — the new collective quantified goal (NCQG) . In a statement, Germany — represented by Scholz despite his absence at the Cop — and other G7 members like Canada, France, or the Netherlands agreed that "developed countries must continue to take the lead and live up to existing finance commitments". Germany faces early elections as the government lost its majority last week following the sacking, by chancellor Olaf Scholz of the Social Democrat SPD, of finance minister Christian Lindner of the pro-business FDP party and the FDP's subsequent withdrawal from the ruling coalition. Polls suggest that the CDU/CSU group will easily win the next federal elections which are scheduled to take place on 23 February. The FDP's persistent refusal to allow Germany to take on more debt to enable more public funding, including of clean technologies, was the main reason for Lindner's sacking. By Chloe Jardine and Victoria Hatherick Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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