Public spending watchdog sees wrongdoings in tolling contract
08/02/2024
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Roberto Noronha Santos — Foto: Silvia Zamboni/Valor
The discussions between Unigel and Petrobras around the natural gas used as raw material in the fertilizer factories leased by the petrochemical company took on a new shape. In a report dated Wednesday (31), the Federal Court of Accounts (TCU) concluded that there were improprieties in the tolling contract signed between the two companies. Unigel claims to be the aggrieved party due to the proposal made by Petrobras.
“Unigel is the only one affected in this case,” CEO Roberto Noronha Santos told Valor. “There is no type of wrongdoing involving Unigel and that has not been mentioned in the report,” he added. Petrobras did not immediately respond to Valor’s request for comment.
Unigel opened arbitration against Petrobras asking for financial re-balancing of a take-or-pay natural gas supply contract and will seek compensation for losses during the period when the tolling contract was negotiated. According to Justice Benjamin Zymler, rapporteur of the process at the public spending watchdog, “the economic assessment, which should have guided the decision, was biased, by considering risks and opportunities that should not have been taken into account and underestimating others.”
Furthermore, upon signing the contract, Petrobras failed to “follow the best governance practices that guide state-owned companies,” according to the rapporteur. He pointed out that Petrobras’s top management took high risks given unfavorable timing—with falling urea prices in the international market—and a serious financial crisis faced by Unigel.
Earlier this year, TCU experts pointed out that the agreement could generate losses of R$487.1 million for the state-owned company, in net present value. Justice Zymler also points out, in his report, that the value of the tolling contract, of R$759 million, contrasts with the R$280 million presented by Unigel as the necessary amount to achieve breakeven.
According to Mr. Noronha, who was ahead of the negotiations, the tolling contract was proposed by Petrobras on June 22, 2023. The purpose was to enable the resumption of nitrogen fertilizer production in two of Petrobras’s factories, leased to Unigel for up to 20 years. Operations in the so-called “fafens” (nitrogen fertilizer factories) had been halted in the first half of 2023 on the grounds that the prices of natural gas, used as raw material, made the business financially unviable after the sharp drop in urea prices on the international market.
However, the public spending watchdog pointed out that, after the signing of the contract, there were signs of wrongdoing and the plants remained closed. In June, a year after the contract was signed, Petrobras terminated the contract, claiming that certain conditions had not been met. “It was a tough negotiation,” Mr. Noronha said of the tug of war between Unigel and Petrobras over the value of the contract, which was signed six months later. During most of that period, the two factories remained closed, costing Unigel R$35 million monthly, with the expectation that operations could be resumed, he added.
*Por Stella Fontes — São Paulo
Source: Valor International