(The following statement was released by the rating agency)
July 22 - Standard & Poor's Ratings Services said today that it raised its long-term corporate credit rating on Uruguay's 100% state-owned fuel company, Administracion Nacional de Combustibles Alcohol y Portland (ANCAP), to 'BB-' from 'B+'. The rating action follows the recent upgrade of the Oriental Republic of Uruguay to 'BB-' from 'B+'. The outlook is revised to stable from positive.
Uruguay's diminishing economic vulnerabilities and solid commitment to sound macroeconomic policies support the upgrade (form more information please see "Oriental Republic of Uruguay Long-Term Rating Raised To 'BB' From 'B+'; Outlook Stable", published July 22, 2008, on RatingsDirect). The stronger macroeconomic framework should continue positively affecting ANCAP, particularly enhancing its financial flexibility.
"The ratings on ANCAP reflect Uruguay's ownership, the risks inherent in operating as a single-asset refiner, and the potential effects of deregulating the Uruguayan fuel market. The ratings also incorporate our expectations that ANCAP will maintain its dominant market position in Uruguay in the medium term," said Standard & Poor's credit analyst Luciano Gremone. ANCAP's credit quality remains linked to that of Uruguay because ANCAP is state owned. As of Dec. 31, 2007, ANCAP had about $354 million in financial debt (unaudited figures, including $335 million of long-term supplier financing with Petroleos de Venezuela [PDVSA]).
The Uruguayan government influences the company significantly, particularly in the budget-approval process, indebtedness authorization, price adjustments, and tax payments. Because ANCAP's operations are concentrated in Uruguay, the country's financial system developments and growth prospects also affect the company.
The stable outlook indicates the link between ANCAP's credit quality and the sovereign's financial health. We view the consolidation of a stronger macroeconomic scenario in Uruguay as beneficial for the company's business environment. Nevertheless, the ratings could come under pressure if the company assumes a significantly more aggressive capital structure that could affect its financial profile, combined with a change in our perception of potential support from its owner.
Complete ratings information is available to subscribers of RatingsDirect, the real-time Web-based source for Standard & Poor's credit ratings, research, and risk analysis, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; select your preferred country or region, then Ratings in the left navigation bar, followed by Credit Ratings Search. (New York Ratings Team)