Quito, Ecuador, April 26, 2003



On April 16, the credit rating agency Moody's discontinued rating OCP Ltd. due to a lack of transparency. Faced with this situation and the increase of problems and risks associated with the construction of the new pipeline, the banks that are financing the pipeline for heavy crude and the multinational members of the OCP consortium are beginning to question their financial judgment and are showing signs of worry.

In October of 2002, Moody's decided to lower its credit rating for OCP from Baa2 to Baa3 and announced that OCP could be subject to possible future lowering of its rating (the lower the rating, the greater the financial risk). This decision was "due to environmental protests and work stoppages, an on-going tax dispute between the government of Ecuador and the upstream sponsors, a likely shortage of expected crude throughput for the pipeline in the early years, and a decline in the average credit rating of the sponsor/shipper group". With a rating of Ba, the OCP-debt would have been considered as "junk bonds".

But something even worst happened when Moody's decided in the middle of April to withdraw completely its rating of OCP Ltd. and OCP Ecuador S.A. This decision was taken just a few days after the oil spill at Papallacta caused by construction on the OCP project. In its decision, Moody's cited inadequate financial and operating information required to monitor the ratings. This notable event could have important consequences since investors, pension funds and insurers rely heavily on ratings from Moody's and Standard and Poor's. The latter, interested in knowing about the reality and the risks presented by OCP, met with Acción Ecológica and Environmental Defense on May 14th, in New York.

During our visit to the United States we held meetings with representatives of Canadian and American investment funds, who showed that they were very concerned about the current OCP situation. Similarly, the Director of the Italian bank Banca Nazionale de Lavoro, which is participating in financing OCP with 50 million dollars, admitted that OCP is a "critical and problematic" project. Representatives of this bank have said unofficially on various occasions that they're thinking of selling their shares but declared officially that they didn't do so for ethical reasons.

Elsewhere, the Canadian oil company Encana, which holds 31.40% of OCP Ltd, invited the Toronto Environmental Alliance, a member organization in the international campaign against OCP, to attend its annual meeting. At a previous meeting, directors of the firm expressed worry about the possibility of incurring damage to its image as a result of its participation in the OCP project. In Germany, the director of Westdeutsche Landesbank admitted, following a protest carried out by Greenpeace on the 16th of May, that it would be much more cautious with upcoming investments.

While investors and multinational members of the OCP consortium are starting to realize their errors and deciding to correct them in any future investments, we Ecuadorians are preparing to receive a pipeline that is flawed on numerous counts and with which consequences we will have to live for another twenty years.

Ing. Nathalie Weemaels