Fitch ups Petrobras Energia to AA(arg)

Fitch Ratings said it upgraded Argentina-based Petrobras Energia SA's national scale rating to AA(arg) from AA-(arg) and affirmed the company's foreign-currency issuer default rating at B+, local-currency issuer default rating at BB- and senior unsecured issue ratings at B+/RR3.

The outlook is stable.

The agency said Petrobras Energia's ratings are supported by the company's solid credit profile, its significant cash generation outside of Argentina and its ability to retain a material amount of its export revenues abroad. The company also benefits from the experience and strong market position of its shareholder, Petrobras Brasileiro. Net debt to EBITDA is 1.7x.

These factors are tempered by the company's exposure to political interference in the regions where it operates. A high level of uncertainty exists as to the company's activities in Venezuela, which represent 30% of its EBITDA and reserves. Fitch said it understands that the recent conversion of the existing operating agreements into joint ventures controlled by PDVSA constitutes the major event risk regarding Petrobras Energia's future.

However, the agency noted that the company's proven access to financing sources and proper cash management, the potential support of its controlling shareholder and the improvement in credit protection measures in 2005 and the first half of 2006 mitigate a possible reduction in cash flow.

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