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Pemex Bonds Inch Up on $667mn Savings on Odebrecht Contract
March 11, 2021
Mexico successfully renegotiated the ethanol contract that was found onerous with Braskem Idesa, a subsidiary of Braskem that is in turn controlled (50.1% voting shares) by Brazilian construction giant Odebrecht. The new contract will generate savings of $667mn for struggling state-owned oil giant Pemex. Mexico’s President López Obrador claims that the former 2010 contract, signed under the administration of former President Felipe Calderon, was the result of corruption. Recently, Odebrecht faced a three year suspension for overcharging Pemex in operations at the refinery in Tula.
The original contract stipulated that the state-owned oil company Pemex must supply 66,000 barrels of ethanol daily, a volume that was unrealistic for Pemex to meet, at discounted prices to the Braskem Idesa plant in Veracruz. The contract contained high penalties for defaulting in supplying the demanded volume. Pemex paid around $300mn in penalties over a timespan of five years. Braskem Idesa initially refused to renegotiate the contract in 2018, when López Obredor took office. With the expiration of the contract with the state-owned company CENAGAS for natural gas transportation last year, and Mexico refusing its renewal, Braskem Idesa finally agreed to the renegotiation of the 2010 Pemex deal. The new contract, signed last week, calls for 30,000 barrels of ethanol per day at market prices and omits “onerous” penalties. Pemex is only committed for three years, instead of the 20-year commitment of the 2010 contract. Pemex’s 5.35% 2028s traded higher by 1.5 points at 97.11, yielding 5.86%.
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