Moody's: PDVSA unaffected

Moody's Investors Service said the reported increase in Petroleos de Venezuela SA's (PDVSA) total consolidated debt to $16 billion in 2007 from $2.9 billion at the end of 2006 will not affect PDVSA's B1 global local-currency issuer rating.

The outlook remains stable.

PDVSA's financial results for 2007 have not yet been made public. However, the increase in total debt clearly reflects a continuation of capital spending that exceeds internal cash flow, the agency said, with PDVSA's cash flow from operations heavily affected by large transfer payments to support government social programs. In the absence of such transfers, the company could internally fund its capital spending.

The company's financial leverage remains low and it has maintained access to capital markets and raised significant funds in 2007, Moody's noted, and the low level of the B1 rating already incorporates the political risk associated with PDVSA's transfer payments, past under-investment in production capacity and the state oil company's tight linkage and high contribution to the Venezuelan government's fiscal needs and increasing spending on social programs.

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