PetroChina plans 4b yuan bond issue
[2008-4-3]
Leading Chinese oil company PetroChina Co has applied for permission to issue 4 billion yuan (US$483.2 million) in domestic bonds, sources close to the company said .
PetroChina would use the proceeds from the issue, which comes on top of a 1.5 billion yuan (US$181 million) issue of 15-year bonds that won approval last year, to fund oil exploration and projects such as a giant west-east gas pipeline the company is building.
"The company has submitted an application to issue 4 billion yuan in bonds, but there's still approval procedures to go through," said a source familiar with PetroChina's plans.
"I don't see it happening too soon," the source said. "The company is not in urgent need of capital right now."
The company hoped to go ahead with the earlier-approved 1.5 billion yuan bond issue in June or July, underwriting sources said. That tranche of 15-year bonds would bear a coupon of 4.4 to 4.7 per cent, one underwriting source added.
PetroChina is one of several Chinese companies choosing to tap debt rather than equity markets, capitalizing on the lowest domestic interest rates in decades while shying away from languid stock markets down about a third from their peak in mid-2001.
"It's a smart strategy. They're taking advantage of low interest rates, as well as taking advantage of projects that could diversify their reliance on the Middle East," said oil analyst Gordon Kwan of HSBC Securities.
"For any other company, 4 or 5 billion yuan (US$604 million) is a lot. But to a company that has annual capex of 60 to 70 billion yuan (US$7.2-US$8.45 billion), that's tiny," he said, referring to potential spending plans of China's largest oil and gas producer.
PetroChina is one of 10 companies which won approval last year from the State Council - China's cabinet - to issue domestic bonds, securities sources have said.
It is seeking funds to erect a 4,000-kilometre gas pipeline, originating in the remote western deserts of Xinjiang and ending in Shanghai and estimated to cost US$5.2 billion.
Besides building the pipeline, PetroChina and its partners in the project must also develop gas fields, build distribution networks and power plants - which could put the entire project's price tag at a whopping US$20 billion.
Under a framework agreement for the project, PetroChina would control 50 per cent of the venture. Partners including Royal Dutch/Shell, ExxonMobil and Russian energy giant Gazprom would each hold 15 per cent.
The remaining 5 per cent stake would go to China's number two oil giant, Sinopec Corp.
PetroChina would use the proceeds from the issue, which comes on top of a 1.5 billion yuan (US$181 million) issue of 15-year bonds that won approval last year, to fund oil exploration and projects such as a giant west-east gas pipeline the company is building.
"The company has submitted an application to issue 4 billion yuan in bonds, but there's still approval procedures to go through," said a source familiar with PetroChina's plans.
"I don't see it happening too soon," the source said. "The company is not in urgent need of capital right now."
The company hoped to go ahead with the earlier-approved 1.5 billion yuan bond issue in June or July, underwriting sources said. That tranche of 15-year bonds would bear a coupon of 4.4 to 4.7 per cent, one underwriting source added.
PetroChina is one of several Chinese companies choosing to tap debt rather than equity markets, capitalizing on the lowest domestic interest rates in decades while shying away from languid stock markets down about a third from their peak in mid-2001.
"It's a smart strategy. They're taking advantage of low interest rates, as well as taking advantage of projects that could diversify their reliance on the Middle East," said oil analyst Gordon Kwan of HSBC Securities.
"For any other company, 4 or 5 billion yuan (US$604 million) is a lot. But to a company that has annual capex of 60 to 70 billion yuan (US$7.2-US$8.45 billion), that's tiny," he said, referring to potential spending plans of China's largest oil and gas producer.
PetroChina is one of 10 companies which won approval last year from the State Council - China's cabinet - to issue domestic bonds, securities sources have said.
It is seeking funds to erect a 4,000-kilometre gas pipeline, originating in the remote western deserts of Xinjiang and ending in Shanghai and estimated to cost US$5.2 billion.
Besides building the pipeline, PetroChina and its partners in the project must also develop gas fields, build distribution networks and power plants - which could put the entire project's price tag at a whopping US$20 billion.
Under a framework agreement for the project, PetroChina would control 50 per cent of the venture. Partners including Royal Dutch/Shell, ExxonMobil and Russian energy giant Gazprom would each hold 15 per cent.
The remaining 5 per cent stake would go to China's number two oil giant, Sinopec Corp.
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