Bangkok--29 Nov--Fitch Ratings
Fitch Ratings has today affirmed PTT Public Company Limited’s (PTT) Long-term foreign currency Issuer Default Rating (IDR) at ‘BBB’, Long-term local currency IDR at ‘A-’, Short-term foreign currency IDR at ‘F3’, National Long-term rating at ‘AAA(tha)’, National Short-term rating at ‘F1+(tha)’ and National Long-term rating on its senior unsecured debentures at ‘AAA(tha)’. The Outlook on the Long-term foreign currency IDR and National Long-term rating is Stable, while the Outlook on the Long-term local currency IDR is Negative.
The affirmations follow the announcements that PTT’s major subsidiary, PTT Exploration and Production Public Company Limited (PTTEP), is to acquire a 40% interest in the Kai Kos Dehseh Oil Sands (KKD) project in Canada from Statoil ASA, as well as the Australian government’s review of PTTEP’s license to operate in Australia following the Montara oil leak incident.
“Higher spending as a result of PTTEP’s acquisition of KKD is likely to affect PTT’s credit metrics and weaken the standalone local currency IDR. Additionally, the uncertainty surrounding PTTEP’s Australian operations poses a risk to PTT’s future cash flows,” says Lertchai Kochareonrattanakul, Senior Director with Fitch’s Corporates rating team. So, the Outlook for PTT’s standalone local currency IDR (‘A-’) has been revised to Negative. “However, the company’s local currency IDR would benefit by one notch of implied support from the government, if the deterioration in credit metrics warrants a downgrade of PTT’s standalone rating to below ‘A-’,” adds Mr Kochareonrattanakul.
With a USD2.28bn acquisition cost for KKD, PTT’s financial leverage, measured by adjusted net debt/operating EBITDAR, will increase to within a range of 2.0x-2.5x over 2011-2013, which is higher than Fitch had previously expected. In addition, if PTTEP’s petroleum titles in Australia are cancelled, it would affect PTTEP’s sale volumes and cash flow projections, as well as delay PTT’s de-leveraging.
Under its parent/subsidiary methodology, Fitch rates PTT on a bottom-up basis, and would assign a one-notch uplift to reflect implicit support from the government. The one-notch uplift will be valid only when the Sovereign rating is higher than PTT’s standalone rating.
The Negative Outlook on PTT’s Long-term local currency IDR reflects the Outlook on the Sovereign’s Long-term local currency IDR.
Contact:
Primary Analyst
Lertchai Kochareonrattanakul
Senior Director
+66 2 655 4760
Fitch Ratings (Thailand) Limited
Wave Place 13th Fl.
Wireless Road, Lumpini, PatumwanBangkok 10330, Thailand
Secondary Analyst
Ekapan Prompraphant
Analyst
+66 2 655 4753
Committee Chairperson
Steve Durose
Senior Director
+61 2 8256 0307