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PetroChina to sell bonds

By Wan Zhihong (China Daily)
Updated: 2008-06-12 09:32

PetroChina Co, the country's largest oil producer, plans to issue up to 60 billion yuan ($8.67 billion) worth of corporate bonds to reduce its debt and supplement the working capital.

The bonds will have maturities of up to 15 years and will be sold in several tranches, the Beijing-based company said in a statement yesterday. It will be the company's largest ever bond sale.

"The company needs large amounts of capital for project investments during the 11th Five-Year Plan (2006-10), as well as to cover rising windfall taxes caused by soaring crude prices and government caps on domestic refined oil product prices," said the statement.

Part of the proceeds will be used for the construction of the country's second West-East natural gas transmission pipeline.

The government's control on refined oil products and the increasing expenditure on windfall taxes have squeezed PetroChina's profits, said Liu Gu, an analyst with Guotai Jun'an Securities in Shenzhen.

"We predict the company's net profit will drop 45 percent in the first half of the year," she said. "If the year-long average crude oil price stands at $105 per barrel, we estimate PetroChina will pay over 120 billion yuan in windfall taxes."

In the first quarter, PetroChina's net profit fell 31.5 percent "because refining losses and windfall taxes cut its earnings from record crude prices".

Due to the gap between the high crude prices in the international market and government caps on refined oil like gasoline and diesel, China's refiners have seen big losses in the past months. Sinopec, Asia's largest refiner, saw a loss of over 20 billion yuan in the first quarter.

However, because of the high CPI at present, China will not adjust the relatively low price of gasoline and diesel, according to the National Development and Research Commission.

China's current threshold for windfall taxes, or special oil gains levy, is $40. Officials from PetroChina and Sinopec have earlier said the government should raise the threshold.

The tax threshold should have been raised when crude price surpassed $80 per barrel, PetroChina Chairman Jiang Jiemin said last month. The threshold is still unchanged.

In another statement yesterday, PetroChina said it plans to buy 208 filling stations and 25 fuel storage sites from parent China National Petroleum Corp for 1 billion yuan.