Bangkok--14 Mar--Fitch Ratings
Fitch Ratings (Thailand) Limited has assigned Thai Oil Public Company Limited’s (TOP, ‘AA-(tha)’/Stable/‘F1+(tha)’) THB3bn senior unsecured debentures due 2017 and THB7bn senior unsecured debentures due 2027 National Long-term ratings of ‘AA-(tha)’. The proceeds from the debentures will be used to refinance debt and fund working capital and capex.
TOP’s ratings reflect its large scale, its highly complex production capacity and cost competitiveness relative to peers. Continued improvements in efficiency and an increase in higher value products have helped maintain its competitive position.
Fitch notes that TOP has strategic and operational links to PTT Public Company Limited (PTT, ‘AAA(tha)’/Stable) as its major refinery. Some of these benefits have been incorporated into TOP’s credit profile. However, Fitch has not provided an uplift to TOP’s rating given PTT’s 49.1% stake and the moderate linkages between the two companies.
The company’s forward integration into the aromatics, lube base oil and solvent businesses has broadened its exposure to the oil value chain, and reduced margin volatility. Meanwhile, its investment in the power sector should partially offset the cash flow volatility of its refining business, although its contribution to EBITDA is limited.
TOP’s credit profile is tempered by its high vulnerability to oil prices and refining margin fluctuations, as well as by the cyclicality of its petrochemical business. Other credit concerns relate to its exposure to both a single production site and a single market. High dependence on PTT for sales (about 40% of petroleum product sales in 2011) is partly mitigated by PTT’s strong credit profile and by its position as Thailand’s main oil marketing and trading company. Also, TOP is exposed to supply risk as Thailand is highly dependent on foreign oil supplies.