This is long-term CAF financing. With this operation, the state oil company reaches 96% of its financial debt in national currency.
The National Administration of Fuel, Alcohol and Portland (Ancap)one of the most important state-owned companies in Uruguay, specified the pesification of the total debt it maintains with the CAF-Development Bank of Latin Americawhich amounts to 150 million dollars.
The operation is part of a progressive strategy of the company to convert the entire debt in foreign currency in commitments in pesos, thus mitigating currency mismatches in its balance sheet and the volatility characteristic of international markets and financial liabilities.
Likewise, with the pesification of the debt with the CAF, Ancap happened to have a 96% of financial debt in national currency with respect to the total of its financial liabilities. In 2017, five years ago, this percentage was just 6%.
This particular debt was contracted in September 2016 for an amount of 300 million dollars, maturing in September 2028. In 2020, the interest rate risk associated with it was mitigated and the rate was changed from a variable rate to a fixed rate in dollars. Three years later, the liabilities were converted to Uruguayan pesos: if having to pay a rate of say 2.57% per year in dollars, Ancap will now have to pay a nominal fixed rate in pesos of 6.95% per year.
The operation was carried out in coordination with the Ministry of Economy and Finance (MEF)through the coverage alternative established in the loan contract that allows the request for currency conversion.
Ancap’s pesification plan
Ancap has been progressively working on the pesification of its debts with the aim of limit the risks of exposure to exchange rate volatility. In this sense, the conversion of the commitments with CAF was the priority for the state oil company, due to its long-term nature and because it has the largest debt balance. The other loan in focus corresponds to the bank Sandander Spain, for around 44 million dollars.
The restructuring of liabilities is carried out with short-term instruments in pesos and Indexed Units (UI) to inflation. And the final plan is to achieve one hundred percent of the conversion of its liabilities, according to the company, to prevent the financial results – now more compromised by the expenses of the technical maintenance stop at the refinery The Tile, which allowed extraordinary margins during much of 2022 and 2023—are affected by exchange rate variations; especially in the context of exchange delay that crosses the country.
Source: Ambito
