Venezuela's PDVSA faces growing debt burden
* Company is financial motor of Chavez's "revolution"
* Largely relies on bonds, bilateral loans for funding
By Marianna Parraga and Daniel Wallis
CARACAS, Aug 1 (Reuters) - Venezuela's state oil company, PDVSA, will have to set aside between $4 billion and $7 billion annually for the next five years to make payments on its increasingly heavy debt burden, according to calculations by economists.
PDVSA, the financial motor of President Hugo Chavez's socialist "revolution," has funded its day-to-day spending in recent years by issuing dollar-denominated bonds and agreeing to bilateral loans with friendly governments such as China.
Last year, it sold new bonds worth $10 billion -- meaning the company's debt jumped 40 percent to almost $35 billion -- at the same time that it doubled its contributions to Chavez's government programs to nearly $50 billion.
Analysts say the repayment schedule for PDVSA's bonds is looking increasingly demanding and predict that 2013 will be a difficult year for the company's finances.
"PDVSA has important maturities coming due next year ... if (oil) prices fall, it becomes even more complicated," said Francisco Ibarra, a partner at Caracas think-tank Econometrica.
Local analysts say PDVSA's debt service payments will jump to more than $2 billion a year for each of the next five years -- up from around $1 billion now.
With Chavez's government relying so much on PDVSA to help fund everything from health clinics to sports and cultural events, falling global oil prices have added to the pressure.
U.S. crude futures have tumbled by roughly one-fifth from this year's high of almost $110 in February.
"The government uses PDVSA to carry out public spending, so its cash flow is under pressure all the time. PDVSA will have to continue issuing bonds and refinancing itself, this time to pay redemptions and maturities," said Boris Segura of Nomura.
Nomura expects PDVSA, one of the world's biggest energy companies, to issue bonds worth $3 billion during the third quarter of 2012. Earlier this year, PDVSA sold $3 billion, with a 9.75 percent coupon, in a private offering.
For its part, Econometrica forecasts the oil company will have to re-order its repayment schedule, postponing the maturity of some notes through swaps, and issuing more longer-term bonds.
PDVSA, which made a profit of almost $4.5 billion on record revenue of $125 billion last year, brings in some 95 percent of the South American country's hard currency earnings.
CURRENCY CONTROLS EASED
This year, it agreed a $1 billion loan from a group of Japanese banks and a $2 billion credit agreement with U.S. oil major Chevron Corp.
Venezuela's Energy Minister Rafael Ramirez says PDVSA will have no problem issuing more debt, backed by a separate raft of multi-billion dollar credits provided the Chinese government.
PDVSA got a boost in July when the central bank loosened Venezuela's strict currency controls, letting state-run companies use 5 percent of their dollar income from exports to receive bolivars at a rate of 5.3 to the greenback, compared to the official rate of 4.3.
That move is expected to boost PDVSA's income by hundreds of million of dollars this year alone.
But the relief to the company's finances is likely to be temporary. Analysts say the best solution to PDVSA's woes would be for the government to devalue the bolivar for a third time in three years -- a hugely unpopular move in an election year.
"Oil prices are not expected to increase (during the rest of) 2012, so the company needs a devaluation to really bring it relief," said Segura. "Meanwhile, it will have to continue relying on loans from China and Japan."
Beijing has become the biggest external financier of Chavez's government, providing some $32 billion in loans over the last few years, which Caracas repays with fuel shipments.
As payments on Venezuela's sovereign bonds also come due, Econometrica calculates that during the next five years the country will have to use between 12 percent and 22 percent of its income from oil exports to meet its obligations on debt issued by the government and by PDVSA.
Wall Street analysts do not expect PDVSA or the government to default on any payments. Chavez has given no indication of defaulting, and his rival at the Oct. 7 presidential election, Henrique Capriles, says he will respect all old debts.
Venezuela's widely-traded bonds have been among the best performers of all emerging market notes in 2012.
They have returned about 12 percent since the start of the year, compared with around 7 percent for JPMorgan's main index of emerging market debt.
That keeps traders focused on PDVSA's financing plans. As the demands on the company increase, it faces a tough choice: maintain its support for Chavez's social programs, or cut investment in projects to increase Venezuelan oil production. (Editing by Jack Kimball)
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