More than 150 individuals and 230 companies are being investigated by the Brazilian police in a situation that has escalated to the highest level of Brazilian politics. The investigations started in March 2014, with the so-called Car Wash Operation (Operação Lava Jato).
Several of Brazil’s largest contractors have allegedly paid politicians and Petrobras’ directors in exchange for contracts with the state-owned oil company. This is reportedly the largest corruption scheme that has ever taken place in the country.
Sete Brasil has also been severely hit by the same problem. The company was created to build and own the 29 platforms to be used by Petrobras in the pre-salt. The rigs are under construction in five shipyards in the country. Sete Brasil is waiting on an approval by the national development bank (BNDES) to pay BRL 11 billion in debts.
The former director at Petrobras, and Sete Brasil, Pedro Barusco claimed that three shipyards had agreed to pay 0,9% over the total value in order to secure contracts. The shipyards are Atlântico Sul, Ecovix and Enseada Paraguaçu.
Sete Brasil was going to invest approximately BRL 70 billion in drilling ships for the Brazilian pre-salt. Several Norwegian suppliers are among those who have signed contracts with Sete Brasil and the yards building the rigs. DNB estimates that contracts signed by Norwegian suppliers are worth BRL 12-18 billion.
A potential outcome could be that those companies face long delays in delivery and payment, whereas a more pessimist scenario could be that those contracts would be renegotiated or cancelled. If Petrobras would choose to renegotiate some of its contracts, it would benefit from the low oil price and lots of spare capacity in the international rig market. Today’s prices on drilling rigs in the chartering market are cut by half.
Private banks have capitalized Sete Brasil with roughly BRL 40 billion in short-term loans. The creditors now fear the possibility of default, especially after the British bank Standard Chartered decided to call on the Brazilian guarantee fund for shipbuilding, FGCN. The national development bank BNDES has been trying to renegotiate the terms of the lending of approximately BRL 30 billion to the company. Other lenders include Citibank, Itau BBA, Sumitomo, Scotiabank, Bradesco, Santander and Standard Chartered.
BNDES has offered to disburse the money through other lenders instead, rather than directly to Sete Brasil, thus leaving it to the banks to create their own insurance against default or the impact of future impairments.
“The fact that we have not been able to go forward has nothing to do with construction risk or performance issues and everything to do with Operation Carwash and the special risks that this has created,” a BNDES source told Upstream last week.
Some of Sete Brasil’s private-owned creditors have suggested the state-owned Banco do Brasil and Caixa Econômica Federal could intermediate the transaction. Neither banks have accepted it, but they consider alternatives to cover the amount promised by BNDES, since the total is inferior to BRL 30 billion.
“Brazil is good in finding solutions for crisis. This is a complex situation which several players have been dragged into, and it had become a snowball that can damage the Brazilian economy. For Norwegian companies that have solid financial basis and the abilities to have a long-term perspective in Brazil, things will calm down after the storm. And something good often comes after crisis,” said Arne Christian Haukeland, DNB’s director in Brazil.
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