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The new fuel policy implemented by state-run Petroleo Brasileiro SA is causing trouble for a Mubadala Capital-owned oil refinery, handing bondholders one of the worst returns in Latin America.
Mubadala’s Acelen, which operates the refinery in northeast Brazil, saw its notes fall into distressed territory at around 63 cents on the dollar, down 26 cents since February. The outlook for debt due in 2031 was cut to negative earlier this month by Moody’s Investors Service, which flagged growing risks to the firm’s cash generation.
The market’s increasing unease over the Mataripe refinery’s future says less about the company itself than it does about the fallout from Petrobras’ fuel policy. The government-controlled energy company has been selling gas and diesel in Brazil at a discount to international prices under President Luiz Inacio Lula da Silva, who began questioning why domestic prices were so high after taking office.
While the company raised fuel prices last week to reduce the gap with international levels, it has been selling fuels below international levels for much of this year.
Acelen says their refinery is at a disadvantage: On one hand, Petrobras, the dominant supplier in the country, is selling them crude at high prices. And on the other hand, they’re unable to compete with rival refineries that are putting out cheap gas and diesel to comply with the fuel policy. The allegations were made in a complaint to Brazil’s antitrust agency Cade in May.
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