EM LATAM CREDIT: Petrobras: Retail Fuel Sector - Neutral
(PETBRA; Ba1/BB/BB)
"Petrobras Eyes Return to Retail Fuel Sector to Limit Prices" - Bbg
President Lula as well as the CEO of Petrobras Magda Chambriard have raised concerns about retail fuel prices not reflecting underlying reduced wholesale price cuts.
A five-year plan now being formulated might include transforming the government controlled Petrobras into a more vertically integrated entity by making more refining investments and possibly re-nationalizing or buying a stake in the business known as Vibra Energia.
As the details of this plan emerge we wonder what the impact might be on MC Brazil Downstream (MCBRAC; B1/NR/B+), the Abu Dhabi investment company Mubadala owned refinery.
Petrobras sold the asset years ago under a previous Brazil government administration and was approached last year about buying it back but so far Petrobras has not expressed interest.
There is also the impact on Raizen to consider as the company has a substantial fuel distribution business under the Shell brand if this move to lower retail fuel prices results in tighter profit margins.
We don't see much impact on Petrobras yet as management seems to be working well with the government on its goals, unless this results in some major event risk down the road.
PETBRA 2035s were last quoted T+195bp, 51 bp tighter since March 31st and 52bp tighter YTD.
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