Fitch Ratings said Aug. 31 that it has affirmed and removed FertiNitro Finance Inc.’s ‘B-‘ rated US$250 million 8.29 percent secured bonds, due 2020, from its Rating Watch Negative. The Negative Rating Watch addressed Fitch’s concerns that a change in Venezuela’s petrochemicals law would force FertiNitro to redirect portions of its fertilizer output from the world export markets to the Venezuelan market, with sales subject to pricing dictated by the government. According to the offtake agreement between Petroquimica de Venezuela, S.A. (Pequiven) and FertiNitro, Pequiven is obligated to re-sell, on a gradually decreased percentage, its 50 percent share of the plant’s production outside Venezuela at market prices. Fitch believes that the most recent amendment to the petrochemicals law (published in July) is not likely to cause project revenues to decrease substantially during the remainder of 2006 and in 2007. Still, Fitch said significant uncertainty remains regarding additional modifications to, and adverse interpretations of, the fiscal, legal, and regulatory framework that could potentially impair production and export revenue. Fitch will continue to monitor legislative and regulatory developments in Venezuela and take rating action as appropriate.
Fitch noted that in May the plant completed a 180-day Second Reliability Test, which had been deferred from 2003 with lender consent. Fitch said that through July the project achieved the highest utilization rates since completion, with urea production reaching 101 percent of the Offering Circular target and ammonia reaching 98 percent.
In 2005, collections on sales rose 4.7 percent on stronger ammonia and urea prices. Higher prices in the global markets offset the reduced shipments that resulted from scheduled shutdowns of the urea and ammonia trains in the summer. Higher operating costs combined with the extinction of tax credits and loss carry-forwards, which resulted in tax payments of $21.5 million and decreased cash available for debt service in 2005 to $116 million from $146 million in 2004. Ample accumulated cash balances enabled FertiNitro to pay $36.9 million of deferred bank loan principal in April 2005, ahead of schedule, in addition to the programmed semi-annual amortization payment of $21.7 million. A cumulative net draw of $8.3 million from the restricted cash account enabled FertiNitro to meet total debt service payments of $129.9 million in 2005.
FertiNitro ranks as one of the world’s largest nitrogen-based fertilizer plants, with nameplate daily production capacity of 3,600 mt of ammonia and 4,400 mt of urea. It is owned 35 percent by a Koch Industries Inc. subsidiary, 35 percent by Pequiven, 20 percent by a Snamprogetti S.p.A. subsidiary, and 10 percent by a Cerveceria Polar, C.A. subsidiary.