PetroChina Seeks U.S. $22 bln in Financing

May 7, 2009
(China Post ) - PetroChina Co., the world's second- largest company by market value, said it may need as much as 150 billion yuan (US$22 billion) in funds this year because tax payments may rise and cash flow has diminished.

The company raised 50 billion yuan in a bond issue in the first quarter and will seek approval for the remaining 100 billion yuan in the annual meeting this month, spokesman Mao Zefeng said in Hong Kong today. Free cash flow fell 76.9 billion yuan in 2008 because of taxes and investments, the company said in a statement to the Shanghai stock exchange earlier.

“The money raised will help us maintain a stable dividend policy and contribute to the company's capital expenditure,” Mao said. “It will also help stabilize cash flow.”

PetroChina plans to spend 233 billion yuan this year. The company may pay as much as US$1.4 billion for a stake in a Kazakh oil company to take advantage of lower commodity prices and expand overseas, Chairman Jiang Jiemin said on April 16.

The oil producer had negative free cash flow of 44.9 billion yuan in 2008, according to the statement. Free cash flow is the cash available for investing or financing after meeting certain expenses from operations.

“PetroChina still has a very healthy financial position as its debt-to-asset ratio is low,” Grace Liu, an oil analyst at Guotai Junan Securities Hong Kong Ltd., said by telephone from Shenzhen. “It won't be hard for them to borrow from banks.”

'Severe Challenges'

PetroChina faces “severe challenges” as the global financial crisis has lowered crude-oil prices and cut fuel and petrochemical demand since the second half of last year, according to the statement dated today.

To conserve energy consumption, China, the world's second-biggest oil user, increased the fuel consumption tax paid by refiners and importers eightfold, according to a statement on the government's Web site on Dec. 19.

PetroChina's fuel-consumption tax payment may jump by 71 billion yuan this year to 84.2 billion yuan because of the rate adjustment, the company said in the statement.

Shares of the oil producer rose 3 percent to HKUS$7.74 as of 3:53 p.m. in Hong Kong, compared with a 2 percent gain in the benchmark Hang Seng index.

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