Bangkok--4 Jun--Fitch Ratings Fitch Ratings has today affirmed Thailand’s PTT Chemical Public Company Limited’s (PTTCH) ratings at National Long-term ‘A+(tha)’ and National Short-term ‘F1(tha)’. At the same time, the agency has affirmed the ratings for PTTCH’s outstanding senior unsecured debentures at ‘A+(tha)’ and outstanding secured debentures at ‘AA-(AA minus)(tha)’. The Outlook for the National Long-term rating is Stable. 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); PTTCH is PTT’s main gas-based olefins arm. PTTCH has a favourable feedstock arrangement and product off-take agreement with PTT. The ratings also reflect the company’s large scale of operation with an increasing level of production integration via downstream units, which should help support earnings growth and reduce earnings volatility in the longer-term. PTTCH is the country’s largest olefins producer and will be one of the top three ethylene producers in Asia Pacific once its new upstream capacity expansion is completed by end-2009. The ratings are also underpinned by PTTCH’s strong financial position and liquidity profile, providing financial flexibility despite a period of major capacity expansion. However, PTTCH’s credit profile is tempered by its high vulnerability to the cyclicality of the petrochemical business. The ratings also reflect the company’s sizeable investment plan amid a less favourable operating environment and relatively high exposure to a single market. PTTCH is also exposed to execution risks from its new, planned projects. PTTCH’s planned capital expenditures are significant at THB85.3 billion during 2007-11, over half of which is earmarked for a large scale olefins expansion that includes a new gas-based olefins cracker and existing plant improvements. The remainder is for the expansion of high density polyethylene (HDPE) capacity and other specialty chemicals projects. Despite the large capital expenditures and a high dividend payout that will result in a significant increase in its net debt from net cash position at end-Q108, PTTCH expects to manage its adjusted net debt to EBITDAR ratio at a relatively moderate level of less than 2.0x during 2008-10. Meanwhile, the strong liquidity profile, supported by the available cash of THB24.7bn at end-Q108 and large undrawn committed credit facilities - including THB7.7bn in working capital, a USD135m revolving credit facility from financial institutions and USD100m in trade credit support from PTT - should continue to provide financial flexibility over the medium term. Despite a lower olefins sales volume due to a plant shutdown for a tie-in of new capacity and maintenance in Q107, PTTCH still reported a 5% year-on-year increase in EBITDAR to THB25bn in 2007, thanks to strong product-to-feed margins for HDPE and a strong operating performance for monoethylene glycol (MEG) business. In Q108, PTTCH reported a sharp improvement in operating performance, with EBITDAR increasing by 94% year-on-year to THB7.8bn, largely due to higher olefins sales volume as a result of a shorter shutdown period than the year before, as well as stronger product-to-feed margins for HDPE and MEG. EBITDAR margins also improved to 36% in Q108 from 31% in Q107. The Stable Outlook is based on the expectations that the improving economies of scale through upstream expansions, the increased production integration via downstream expansions and the favourable feedstock arrangements should help maintain PTTCH’s cost competitiveness and reduce volatility risk during a less favourable industry cycle. These factors are also expected to keep its financial leverage consistent with the current credit metric. Contacts: Lertchai Kochareonrattanakul, Wasant Polcharoen, Vincent Milton; Bangkok, Tel: +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.