Bangkok--11 Sep--Fitch Ratings Fitch Ratings (Thailand) Limited has today assigned National Long-term Ratings of ‘A+(tha)’ to Thailand-based PTT Chemical Public Company Limited’s (PTTCH) new senior unsecured debentures of up to THB6 billion, due 2012 and 2017. The proceeds from the new debentures will be used to fund PTTCH’s new investments, working capital and refinancing of the maturing debt. The ratings are based on the high level of business and operational integration with PTTCH’s major shareholder, PTT Public Company Limited (PTT, ‘AA+(tha)’/Stable), as it is the latter’s main gas-based olefins arm; PTT holds a 55% stake in PTTCH. Also, the ratings factor in the company’s favourable feedstock arrangement with PTT, as well as its significant size and increasing level of production integration via downstream units, which should help support earnings growth and reduce earnings volatility in the longer-term. The ratings are also underpinned by PTTCH’s strong financial position and liquidity profile, providing financial flexibility despite a period of major capacity expansion. At the same time, however, the ratings take into account the cyclical nature of the petrochemicals industry, the execution risks arising from new projects, the risks of undertaking a large investment plan amid a less favourable operating environment and the company’s relatively high exposure to a single market. PTTCH has earmarked THB90.2bn for new investments during 2007-2011, including a large scale olefins expansion through the new gas-based olefins cracker and existing plant improvements, as well as new investments in the downstream polymers and specialty chemicals, which will be largely funded by the proceeds from its THB28bn capital increase in late 2006, the internal cash flow generation and its new debt-funded programme. PTTCH’s net debt and financial leverage are likely to increase from the current net cash position, although the company expects it should be able to manage its net debt to EBITDA ratio at a relatively comfortable level at less than 2.0x over the expansion period. Meanwhile, the strong liquidity profile, supported by the available cash of THB22.5bn at end-H107 and large undrawn committed credit facilities - including THB2.6bn working capital facilities with financial institutions, a USD135m revolving credit facility and USD100 million in trade credit support from PTT - should continue to provide financial flexibility. For H107, PTTCH’s EBITDA declined by 26% year-on-year to THB8.5bn, due to the plant shutdown for scheduled maintenance and the tie-in of additional 190,000 metric tons per annum capacity from the de-bottlenecking Phase I. Operating EBITDA margins also dropped to 28.6% in H107 from an average of 33% in 2006, as a result of its lower product-to-feed margins, given a rise in feedstock costs and higher maintenance expenses during the shutdown period. Contacts: Wasant Polcharoen, Lertchai Kochareonrattanakul, Vincent Milton; Bangkok, +662 655 4755. Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with sub- or low-investment grade international sovereign ratings. The best risk within a country is rated ‘AAA’ and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as ‘AAA(tha)’ for National ratings in Thailand. Specific letter grades are not therefore internationally comparable. Fitch’s rating definitions and the terms of use of such ratings are available on the agency’s public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch’s code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the ‘Code of Conduct’ section of this site.