Analysts see few takers for YPF stake

The market is likely to look favourably on Spanish oil company Repsol YPF's plan to reduce its exposure to Latin America, but candidates to take up a 25% stake in the YPF unit are few, analysts say.

Repsol bought YPF for some $15 billion when it was privatised by the Argentine government in 1999 in what was described by some as the "deal of the century", set to transform Repsol into a major producer.

But Argentina was then hit by an economic crisis and Repsol has been left looking for a solution.

Repsol is now faced by falling production, high taxes and downstream gasoline prices that are capped and are unlikely to change before the country holds elections in October.

The energy company's first idea was to make a public offer of 15% to 20% of YPF's shares. More recently, chairman Antonio Brufau said the group was also looking for a private partner to take a stake of up to 25%, possibly worth about $4 billion.

"I think the market welcomes this move because Repsol needs to reduce its exposure to Latin America," an oil sector analyst at a European bank told Reuters.

Recently, speculation has circulated that Repsol might complete a takeover of Spain's Gas Natural in which it already owns nearly 31%. But some analysts are not keen on that possible deal and say Repsol should concentrate on getting its Latin American exposure right.

"We hold that Repsol's management should resist a Gas Natural merger, and focus instead on finding a palatable solution to the Latam issues, ultimately via a graceful exit," said Citigroup oil analyst David Thomas in a recent note to clients.

An IPO of 20% added to a 25% sale would leave Repsol in a better position, analysts say.

With 55%, it would maintain control, keep YPF consolidated in its accounts but reduce its exposure to the fiscal and political risks of Latin America.

Brufau's recent statement that he was looking for a private partner has complicated the search for potential buyers, because until then the Argentina state oil company Enarsa had looked to be favourite to take the 25% stake.

This would get Repsol closer to the Argentine government, seen by some as an advantage.

"The natural candidate was the state through Enarsa," said Francisco Prack, chief economist at SBS brokerage in Buenos Aires. "The fact that Brufau said (they were looking for) a private company - that was news - and we are seeing several names mentioned."

But Prack said energy companies, banking groups and industrial companues mentioned in the Argentinian press are unlikely to have the financial resources to buy the stake.

"The 25% stake could cost around $4 billion," said another oil analyst. "That's a significant chunk of money and it's possible that a kind of consortium would be got together."

Names mentioned in Argentina have included Carlos Miguens, former owner of the Quilmes brewery, but sources close to the potential investor denied interest, as did Pampa Holding, a power group that has generating plants and distribution companies.

Another name mentioned in the Argentinian press is the Werthein family, which has a large stake in Telecom Argentina and also has financial sector companies, as well as two banks: Macro and Banco de Santa Cruz.

Argentina's Bridas Corp has also been talked about as a possible investor in Repsol, especially as Carlos and Alejandro Bulgheroni, who control it, are close to the government.

Bridas may be restricted, however, by its Pan American Energy joint venture with BP.

"Whoever takes this stake will have to have the blessing of the Argentine government," one analyst said.

Analysts say the IPO part of the deal is unlikely to happen before Argentina's elections in October.

"With (President Nestor) Kirchner back in power, some respite might be expected on prices in Argentina and Repsol would be in a position to maximise the price it might get for YPF," the analyst added.

Yet both sides might want to announce the investors group ahead of the election.

"Either way, I don't see Enarsa as a candidate because it would send the wrong signals to the investor community," said an analyst at a US bank who declined to be named.

"You'd be saying that this is the first step in the re-nationalisation of YPF."