Petrobras puts corruption loss at $2bn

Brazil's Petrobras has estimated its losses from corruption at R$6.2bn (US$2.06bn) and taken a R$44.6bn impairment charge, as the embattled state-owned oil company struggles to emerge from the nation's biggest political bribery case.

Petrobras released long-delayed audited financial statements for 2014 late on Wednesday, narrowly meeting an end-April deadline. A late filing could have set it on course for a technical default on some of its $137bn in debt.

"From this moment, Petrobras turns over a new page," said the company's president, Aldemir Bendine, who was hand-picked by Brazil's President Dilma Rousseff to rescue the company.

The scandal, in which prosecutors allege scores of politicians colluded with former Petrobras executives and contractors to extract billions of dollars in bribes, had sparked fears of systemic risk to Brazil's finances if the company defaulted.

It helped trigger nationwide protests over the past two months amid calls for Ms Rousseff's impeachment.

Petrobras said it made a net loss last year of R$21.6bn compared with a net profit of R$23.6bn in 2013 on revenue of R$337.3bn, up 11 per cent on a year earlier.

"At best, today's release should help ease negative rating risks on the sovereign and further stabilise market sentiment," Aryam Vazquez, senior economist at Oxford Economics, said in a note.

Petrobras was plunged into crisis in November when its failure to calculate corruption-related losses prevented auditors PwC from signing off its accounts, cutting it off from capital markets and raising concerns over a possible government bailout.

Mr Vazquez warned that the scandal would continue to have far-reaching consequences not only for Petrobras but for the rest of the Brazilian economy.

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"With over 750 projects now under investigation, the repercussions are likely to affect key supply chains and industrial contracts that will continue to weigh on Brazil's real economic activity prospects this year," he said.

The results, which Mr Bendine said were released without qualification by PwC, are also being closely watched in New York, where the company is facing investor lawsuits.

Mr Bendine said Petrobras would refrain from paying a dividend this year to preserve cash. This was a potentially controversial move for a company whose main attraction to many retail investors was as a reliable source of dividends, analysts said.

Petrobras said it calculated the R$6.2bn figure for losses from corruption by studying statements of key witnesses in the case, who include former Petrobras director Paulo Roberto Costa.

"Senior executives of Petrobras entered in conclusion with businessmen, suppliers and others involved to establish a cartel that between 2004 and April 2012 systematically imposed additional costs in the purchase of assets by the company," Petrobras said.

Petrobras said it based the calculation on witness statements that 3 per cent of the value of contracts paid to the cartel of 27 companies went to finance irregular payments to political parties and others. Petrobras also counted payments to some companies that were outside the cartel.

The impairment charge, on the other hand, related to falls in the value of assets as a result of the drop in the oil price, project delays and other factors.

Petrobras's announcement came only hours after a Brazilian judge made the first convictions in relation to the corruption scandal, dubbed 'Carwash' by police. Mr Costa and black-market money dealer Alberto Youssef, who have emerged as the main informants in the investigation after signing plea bargains with prosecutors, were both found guilty of money laundering. Judge Sergio Moro also convicted Mr Costa of belonging to a criminal organisation and sentenced another six people for crimes related to the construction of the Abreu e Lima oil refinery in northeastern Brazil - believed to be a key project in the bribery and kickback scheme.

Mr Costa was sentenced to house arrest until October 2016 and Mr Youssef was given at least three years in prison after both men's sentences were reduced as a result of their collaboration with authorities.

However, given that both men still face other charges as part of the investigation, their final sentences could be different, according to a statement from the federal court in Parana state where the case is being heard. Mr Costa and Mr Youssef, who could not be reached for comment, still have the right to appeal.

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