Bangkok--19 Apr--Fitch Ratings
Fitch Ratings (Thailand) Limited has assigned PTT Public Company Limited’s (PTT, ‘AAA(tha)’/Stable/‘F1+(tha)’) upcoming THB15bn senior unsecured debentures due 2019 a National Long-Term rating of ‘AAA(tha)’. The proceeds will be used to refinance debt and fund future capex.
PTT’s ratings reflect its dominance in Thailand’s gas and oil industry, as well as its strategic importance and function as a policy vehicle for domestic energy security and development. Natural gas is a major fuel for the country’s electricity generation. PTT is the sole operator in Thailand’s mid-and-downstream gas industry. PTT is also one of the country’s major exploration and production (E&P) companies, and a leading oil and petrochemicals company.
Gas and upstream operations are major contributors to PTT’s operating cash flows and the main drivers of its growth. Fitch expects cash flows from these businesses to continue to grow and remain a large contributor to total EBITDA over the next five years. Cash flows from gas interests have proven stable, due to long-term sales agreements with customers with minimum take-or-pay conditions and a cost-plus pricing structure. PTT also benefits from generally less volatile gas prices relative to oil prices.
PTT’s credit profile is tempered by its vulnerability to fluctuations in commodity prices, significant budgeted capex, sustained negative free cash flow (after dividend payout) generation expected in the next two years, exposure to regulatory and political risks, as well as some foreign exchange risk.