Brazil: Petrobras Releases Supply Chain Finance Program

Petrobras’ CEO, Jose Sergio Gabrielli de Azevedo, and CFO and Investor Relations officer, Almir Guilherme Barbassa, officially launched the Progredir Program at the Company’s headquarters in Rio de Janeiro. The Program was designed to facilitate the supply of credit at volumes and under conditions that are appropriate for all companies in the Petrobras’ supply chain.

Created in partnership with the six largest retail banks in Brazil (Banco do Brasil, Bradesco, Caixa Ecônomica Federal, Itaú, HSBC, and Santander) and with the National Oil and Natural Gas Industry Mobilization Program (Prominp), the initiative focuses on sustainable supply chain growth and is supported both by the industry and by its professional associations.

The pilot phase of the program, which complements other Company initiatives intended to strengthen its production chain, was launched in September 2010. In this first stage, 15 companies received a total of R$137 million in bank finance. The suppliers’ average cost of borrowing is expected to by 20%.

General Concept – The program seeks to foster a favorable environment for the provision of credit backed by future receivables (payment for services yet to be provided or equipment still to be delivered) under each contract with supply chain participants. Any supplier involved in the chain is, in principle, eligible to join Progredir and obtain an advance from participating banks against future receivables. The credit will not involve Petrobras funding.

In order to improve financial and risk conditions, Petrobras is the anchor of Progredir and will contribute with the entire production chain by transferring its better credit perception in the market to participants. Thus, the use of the receivables generated by the Company will provide greater support and assurance for the granting of unperformed credit to Petrobras’ entire supply chain, allowing access to these resources quickly and in amounts that will give the suppliers financial strength.

Simplified access – Small and midsize companies currently face difficulties in obtaining funding against future receivables. A major impediment is the lack of reliable historical information on each supplier’s performance. This causes uncertainty that prevents the banks from evaluating their actual risks in advancing funds based on creditor performance expectations.

Another issue that significantly increases the risk perceived by banks is possible buyer default. To mitigate these obstacles, the program includes assurance mechanisms designed specifically for Progredir. Furthermore, a Progredir Portal will store information on supply contracts, financing and individual performance data on each supplier, allowing the banks access to supplier track record data.

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Source: Petrobras, June 7, 2011;