S&P Affirms Pemopro S.A. de C.V. 'BB+' Rating.

Business Editors & Analysts

NEW YORK--(BUSINESS WIRE)--Standard & Poor's

Dec. 21, 2001--Standard & Poor's today affirmed its double-'B'-plus rating on Pemopro S.A. de C.V.'s, US$205 million series C notes. At the same time, Standard & Poor's affirmed its double-'B'-plus foreign currency rating on Pemopro's outstanding A and B notes, each for US$161 million. Standard & Poor's also affirmed its double-'B'-plus foreign currency rating on the outstanding US$440 million senior secured tranche A bank loans, due March 2, 2003, which are equally and ratably secured with the series A and B notes and other senior indebtedness. The outlook is positive.

After applying for contractual nonrescission in April 2001, triggered by Pemopro S.A. de C.V.'s inability to meet milestone date No. 6, in September 2001, Pemopro S.A. and PEMEX singed a new agreement. The new agreement sets a new project completion date of June 26, 2002. The new project completion date has been extended by 179 days, well within the 300-day limitation of the original common agreement. The lump-sum contract provides that this contract automatically terminates if the scheduled project completion date is delayed by 180 days due to force majure, or acts or omissions of PEMEX unless PEMEX and Pemopro otherwise agree in writing. Provisions in the common agreement allow Pemopro to exercise such right without the consent of the required voting parties (the bondholders) so long as the lump-sum contract is amended so that the lump-sum contract shall be terminated automatically if the project completion date does not occur on or prior to 300 days following the scheduled project completion date. The new agreement adjusts all critical event dates, as per the new completion date.

According to the independent engineer, the project is on schedule. As of the end of October, Pemopro claimed progress completion of 93.59%, compared to 93.84% required under contractual plan. However, if PEMEX does not make available to Pemopro the Coking Naphtha Treatment plant (unit 21) and the Turbosene U-500 Hydrodesulfurization plant (unit 140) by the first week of January for continued work, then there is a possibility the June 26 completion date may not be met. The independent engineer (as well as Standard & Poor's) is concerned about PEMEX's ability to release these two plants to Pemopro on a timely basis. Notwithstanding the above concern, Standard & Poor's considers likely, as was the case with Conproca S.A. de C.V., that Pemex will give its acceptance to the project if completion is not attained by June 26, 2002 due to PEMEX's delay in making the mentioned units available for revamping. Standard & Poor's will closely monitor progress on the release of the two plants in question.

The rating reflects the unconditional obligation of PEMEX-Refinacion either to repay the notes and the bank facility at project acceptance, or pay the termination value upon termination of the PEMEX contract prior to provisional acceptance of the project. PEMEX-Refinacion's payments are, in turn, unconditionally guaranteed by its parent Petroleos Mexicanos (PEMEX) (foreign currency rating double-'B'-plus/Positive/--). Standard & Poor's concludes that this payment, together with remaining amounts on deposit in the various accounts funding the project, any amounts payable by the sponsors, and any amounts that have not been drawn under the performance guarantee, will be sufficient to redeem Pemopro's senior indebtedness, be it upon project acceptance or upon early termination. PEMEX's obligation to the senior indebtedness will rank pari passu with all other senior unsecured external indebtedness.

The rating also reflects the aggressive schedule the contractors have committed to, although the project is benefiting from the deployment of experienced personnel from the PEMEX Cadereyta project. This concern is offset by:

-- The importance of the refinery to PEMEX's operations and the critical role
PEMEX plays in the Mexican economy;

-- The experience by all three of Pemopro's shareholders in projects of this
nature;

-- The multiple layers of support from the project sponsors, and, in the case
of SK Engineering & Construction Co., Ltd. (SKEC), from SK Corp., a fellow
member of the SK Group of companies, if there is an early termination due to
contractor default; and

-- The fact that the entire project will be developed within the existing
refinery footprint and be located on developed land that is not densely
populated.

Pemopro, S.A. de C.V. ("Pemopro") is a Mexican special-purpose company formed by a consortium composed of SKEC of Korea, owning 70%, Siemens AG (of Germany) (double-'A'/Negative/'A-1'-plus), owning 25%, and Grupo Tribasa, S.A. de C.V. (of Mexico) (Tribasa), owning the remaining 5%. The three companies formed Pemopro for the development, financing, and construction of modifications and improvements to the Francisco I. Madero Refinery owned and operated by PEMEX-Refinacion. This project is part of a strategic upgrading of PEMEX's refineries and should increase Mexico's ability to refine heavy crude oil and produce unleaded gasoline. Because SKEC, Siemens, and Tribasa also worked together on another refinery project in Mexico at Cadereyta, they are able to bring their considerable experience at this similar project to the Madero refinery project. The total cost of the Madero project, including associated contracts and construction period interest, was originally anticipated to be approximately US$1.62 billion, but due to lower-than-expected interest costs, was revised downward to approximately US$1.6 billion.

The bank facility is equally and ratably secured with all other senior indebtedness incurred by Pemopro for the project, including export credit agency financing. Every month during project construction, Pemopro will draw on its existing bank facilities and the notes to pay construction costs and interest. Covered facilities may also be drawn upon to pay interest costs.

If actual interest requirements are greater than expected, or if work scope variations prove more costly than provided for by contingency amounts included in senior indebtedness, supplemental financing will be raised by Pemopro and repaid by PEMEX-Refinacion as a component of the financial cost of the project upon project acceptance or through the termination payment in the event of early termination. PEMEX-Refinacion will repay the previously issued bank facility and these notes upon completion and acceptance of the project.

The series C notes constitute the third and final round of financing for the project. These three supplementary financing efforts together represent the project's deferred financing and were contemplated in the original financing of August 1999.

Deferred financing costs will be reimbursed as a component of the overall works' financial costs on completion or, should it occur, on termination, through the termination value payment.

PEMEX-Refinacion's obligations, under the guaranty agreement, are unconditionally guaranteed by PEMEX, PEMEX Exploracion y Produccion, and PEMEX Gas y Petroquimica Basica, all decentralized public entities of the Federal Government of Mexico. To repay loans granted by the several export credit agencies upon project completion, PEMEX will issue promissory notes matching the loans' repayment profile.

OUTLOOK: POSITIVE

The outlook reflects that of PEMEX entities, which, in turn, reflect and are constrained by that of PEMEX and the United Mexican States. Standard & Poor's expects that PEMEX's legal and political status, its close ties to the government, and its economic importance will not change in the medium term.

Copyright 2001, Standard & Poor's Ratings Services