up to US$1.0 billion proposed senior unsecured notes.
The notes will rank pari passu with the company's currently outstanding senior unsecured obligations. Proceeds from the proposed offering will be used to complete the construction of the Talara Refinery Modernization Project (PMRT). The rating outlook is negative.
Fitch expects
Petroperu will complete PMRT by YE 2021, as the construction has been delayed due to government measures that required the company to halt construction activities. PMRT is 92.3% completed as of YE 2020.
With the proposed offering, Fitch expects Petroperu will secure the funding to complete the project, without incurring additional debt.
As a State-owned company, Petroperu's ratings are equalized with Peru's Sovereign Rating. The ratings reflect its close linkage with Peru's ratings due to its strong government ownership and control, and the very strong incentives to support the company, as it is one of the country's largest liquids fuels suppliers, and its strategic importance to maintaining the country's energy supply.
Petroperu's rating is strongly linked with the credit profile of the Peruvian sovereign, and reflects the sovereign's incentive to provide financial support to the company, given its strategic importance for the country. The company is 100% owned by the Peruvian State.
Government support has been evidenced by multiple actions including the capital injection of US$325 million for PMRT, transferring all of the company's pension liabilities to the State, and recovering some value-added taxes.
Additionally, government support can be seen in the Republic of Peru's approval of a financial guarantee of up to US$1.0 billion to support the financing of PMRT, the precise mechanism by which this guarantee would be activated has not been yet committed, pursuant to Law No. 30130.
Because of the coronavirus pandemic, the government enacted Decree 033/2020 through which Banco de la Nacion (Bank of Nation) is allowed to provide financial assistance to Petroperu and other State-owned companies.