South American states found a clever way to rein in their state oil companies in recent years, to make them respond better to both government regulation and the market, and to bring in a bit of cash in the process. They sold off a few shares of their state oil companies to the private sector, on the public stock market. Such a listing puts the company under control of securities regulators as well as environmental and energy regulators. It may cut down a bit on regulatory capture by the huge state oil companies. And if nothing else, the publicly floated stock price gives a benchmark of how the company is doing.
The most famous cases of this sort of semi-privatization are Petrobras (PBR on the New York Stock Exchange) and Ecopetrol (EC). For years, the idea has been bounced around of doing the same to PDVSA, Venezuela’s state oil company. But President Hugo Chavez, with his fierce rhetoric against privatization, has been an obvious obstacle.
Or maybe not.
Here’s Dow Jones on Venezuela’s plans.
CARACAS (Dow Jones)–Venezuelan state energy monopoly Petroleos de Venezuela, or PdVSA, plans to list shares of a unit on the Hong Kong stock exchange, the company’s finance director said Monday.
PdVSA Finance Director Victor Aular said the company has hired Citic Securities Co. (6030.HK), a unit of Chinese conglomerate Citic Group, to advise on the planned listing, but didn’t offer the name of the unit.
PdVSA and its financial advisers were negotiating the listing and don’t have a time frame for when the listing could be completed, Aular said on the sidelines of a signing ceremony on Monday, where the Venezuelan government signed a number of accords with Chinese state-owned companies for new joint ventures and financing for projects in the oil, mining, and housing sectors.
He added that the PdVSA entity will be used to make share offerings and the unit will manage PdVSA’s minority stakes in commercial joint ventures between the Chinese and Venezuelan governments.
And here’s Bloomberg (scroll to the end of the article):
Citic will help PDVSA sell shares of a subsidiary on the Hong Kong stock exchange, PDVSA finance director Victor Aular told reporters yesterday at the signing ceremony, without saying when the listing will occur. PDVSA wants to list a subsidiary that has various stakes in joint ventures it controls, Aular said.
Well I’ll be.
From the top of my head, if (a humongous IF) PDVSA tries to sell minority stakes in empresas mixtas, it will be the third time in 15 years in trying to do so. Anyone remember EPIC?
And of course they will botch it big time. If the 4th Republic PDVSA couldn’t make it, there is no way the 5th one PDVSA will do so.
I’ve never heard of EPIC! But from what he’s saying, it sounds like a public float of some part of CVP, the holding company for Venezuela’s stake in the joint ventures. Not selling stakes in ventures, but floating a portion of CVP to the public market. However this deal goes, some chosen people are going to get very rich. Which will leave innocents decrying that it was “botched,” in the classic confusion of bug and feature.
OK, hand me the gingko biloba ;-)
Back in 1997, PDVSA decided to keep some minority stakes in certain auctioned fields during the now-infamous apertura petrolera. Then PDVSA pooled some of those assets in a fund called Exploración y Producción Inversión Colectiva (EPIC) and planned to float the fund among small retail investors. This was supposed to piggyback on the success of the first Bonos Petroleros in 1997 (Sociedad de Fomento de Inversión Petrolera, SOFIP),
EPIC was expected to raise $350 MM in a dual listing in Caracas and NYSE, led by Merrill Lynch in the US and Banco Provincial and Banco Unión in Venezuela. Unfortunately, oil and capital markets tanked during the first half on 1998 and the IPO was called off on July ’98. PDVSA toyed with the idea of tapping the markets in the last quarter of ’98, but the Caracas Stock Exchange (back when it mattered) went south big time, devaluation rumors were rampant (I recall a quite emotive Petkoff shouting live on Reuters TV: “READ MY LIPS, NO DEVALUATION, NO ECH-CHANGE CONTROLl!!!”) and some outsider called Hugo Chavez was leading the polls on his way to the Venezuelan Presidency.
PDVSA tried to refloat the EPIC idea in 2000 but it never went past the drawing board. Five or six years later, PDVSA bought out its partners and created the empresas mixtas and the EPIC idea as originally thought died. So color me skeptical that this is going to work this time…
Claro la pureza ideológica llega hasta dónde llega la chequera.
I find it particularly interesting that this is mentioned at the event where the new accords were signed with Beijing. The Chinese have not been pleased with the inability of PDVSA and state ministries to give a reasonable (or any) accounting for funds they have pumped into Caracas. I understand that the Chinese have tried to impose better practices, including by training greater numbers of Venezuelan bureaucrats in China. I wonder if the experiment with privatization that you have caught wind of here is the result of Chinese pressures to impose some fiscal discipline and transparency on PDVSA to protect their investments.
To rephrase your opening line: “[South American states–> China] found a clever way to rein in [their state oil companies–> PDVSA] …, to make them respond better …”
Simple, really, if viewed as just another scam whereby a few privileged insider chavistas will steal much more while the house comes crashing down around them. Looting is the name of the game for many self-proclaimed ‘revolutionary socialists’ at this stage of a regime led by a very sick president who refuses to relinquish power or decline his candidacy. Lina Ron was right: Without Chavez there is no revolution. Better still, if Capriles is elected he inherits a completely bankrupt government, Pdvsa in structural/operational ruins, an immense public debt, a legislature and judiciary where the PSUV holds the majority, and no doubt many government employees who will do anything they can to undermine a new oppo government thinking that will save their jobs and preserve their ‘negocios.’ But this assumes they actually follow through, which Pdvsa rarely does.
Funny, I just wrote something similar in the caracas chronicles blog comments. I agree, it has guiso written all over it. And like you, I also doubt it will ever happen.