Venezuelan urea plant taken off negative watch

25 January 2008 23:31  [Source: ICIS news]

CARACAS (ICIS news)--Fitch Ratings removed FertiNitro Finance from negative watch on Friday, following news that most of the production at its urea plant will be exported.

The plant has a nameplate daily production capacity of 3,600 tonnes of ammonia and 4,400 tonnes of urea and 3,600 tonnes of ammonia.

Venezuela's Pequiven, which owns 50% of the plant's production, told Fitch that it expects to dedicate just 130,000 tonnes of FertiNitro's urea to the local market this year, according to Fitch's statement, leaving ample supplies for export.

Fitch placed FertiNitro's $250m (€170m), CCC rated bonds on negative watch last year after a Venezuelan government decree in March forced the company and other producers of nitrogen-based fertilizers to satisfy domestic demand before exporting product.

The Venezuelan government dictates fertilizer prices and mandates that urea be sold in local currency at the approximate equivalent of $72/tonne, which is about a fourth of the international price, Fitch said in its release. 

The discrepancy between regulated and international fertilizer prices has pressured the local Venezuelan supply chain.

Pequiven has in the past publicly blasted "unscrupulous" middlemen that it says buys fertilizers from the state company at the regulated price and then sells it at much higher market prices.

Fitch determined that FertiNitro's sales were stable last year despite the decree and that some redirection of product to the local market will not substantially disrupt company revenues.

However, Fitch warned that it is still concerned that the amount of urea output diverted to the local market could grow, as demand for urea is still unknown.

Furthermore, official data from the Venezuela Ministry of Energy and Oil shows that Pequiven's wholly owned plants in the Tablazo and Moron complexes are not producing sufficiently to satisfy domestic requirements, Fitch said.

Earlier this week, Pequiven released a statement saying that it foresees its total urea production this year at 990,000 tonnes and that is expects to export 1m tonnes of urea and other fertilizers.

FertiNitro, one of the largest nitrogen-based fertilizer plants in the world, is owned 35% by Pequiven, 35%  by a Koch Industries subsidiary, 20% by a Snamprogetti subsidiary and 10% by Cerveceria Polar, a Venezuelan food and beverage company. The plant has a nameplate daily production capacity of 3,600 tonnes of ammonia and 4,400 tonnes of urea.

($1.00 = €0.68)

By: Jasmina Kelemen
+1 713 525 2653

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