Moody’s has assigned its Baa1 foreign currency bond rating to up to US$293mn of 144A senior unsecured notes to be issued by Chile’s state oil company Enap.
The rating, the agency’s first on Enap’s debt securities, reflects the company’s strategic importance to the Chilean economy, its dominant market position within Chile and the high quality of its refined products.
In addition, the rating considers Enap’s exposure to volatile commodity prices, its declining domestic oil production and heavy reliance on crude oil imports, and its exposure to the political and economic crisis in Argentina.
On the other hand, Enap is 100% owned by Chile’s government and benefits from implicit government support. Enap also has higher refining margins than its competitors because it lacks competitions from other domestic refiners. The company’s transport network and Chile’s increasingly stringent environmental requirements create high entry barriers.
Enap also benefits from its proximity to Argentina’s oil producing regions, which supply over 75% of its crude imports. However, any disruptions of crude deliveries from Argentina, or the imposition of additional taxes on Argentine crude exports, could weaken the company’s refining margins, Moody’s warns.
Enap’s three refineries supply 87% of the Chile’s petroleum needs. The new notes will be placed in privately negotiated transactions.