Bangkok--11 Jul--Fitch Ratings Fitch Ratings (Thailand) Limited has today affirmed IRPC Public Company Limited’s (IRPC) National Long-term rating at ‘A-(tha)’ (A minus(tha)) and its National Short-term rating at ‘F2(tha)’. At the same time, the agency has affirmed the ‘A-(tha)’ (A minus(tha)) National Long-term rating on IRPC’s outstanding senior unsecured and unsubordinated debentures amounting to THB10 billion. The Outlook on the ratings remains Stable. The ratings reflect IRPC’s competitive advantage as a fully integrated oil refining and petrochemicals producer, and its expertise and long track record in downstream petrochemicals in Thailand. The fully integrated petrochemicals production provides cost competitiveness, a wide range and optimisation of product line, as well as a reduction of earnings volatility. The ratings are also based on IRPC’s financial position with a substantially lower leverage due to recapitalisation and higher cash flow generation, though Fitch notes it is likely to weaken in the medium term due to new investments. IRPC’s financial leverage continued to improve in 2007, although it weakened slightly in Q108. Its adjusted net debt/EBITDAR fell to 0.6x in 2007 from 1.4x in 2006, but increased to 0.9x in Q108 (based on last 12 month EBITDAR). FFO adjusted net leverage declined to 0.5x in 2007 from 1.3x in 2006, but rose to 0.8x in Q108 (based on LTM FFO). However, more aggressive investments in 2008 to 2011, given the execution of the second phase of its investment plan, will result in higher debt and leverage from 2009 to 2011, while cash flows from the new projects should reduce leverage thereafter. The average next five-year adjusted net debt/EBITDAR is expected to fall in the range of 2.0x-2.5x. The agency also notes that IRPC benefits from having PTT Public Company Limited (PTT) as its largest shareholder, as cost savings will be gained through cooperation with the PTT group. However, IRPC’s operational overlap and integration with the PTT group is likely to remain limited, given IRPC’s independent and fully-integrated facilities. IRPC’s credit profile is tempered by its high vulnerability to oil prices, gross refinery margin and petrochemicals prices fluctuations, which will have a substantial impact on its earnings and cash flow generation. The ratings also reflect the need for IRPC to improve its refinery complexity to meet more stringent standards and improve production, and its relatively high reliance on exports, given the country’s excess capacity in polymers. IRPC is also exposed to supply risk on oil refining business owing to its high dependence on foreign oil supplies. The Stable Outlook reflects the agency’s expectation that IRPC will maintain its competitive advantage and relatively strong market position, supported by its fully integrated oil refining and petrochemicals business, and keep its leverage manageable during cyclical downturns and the period of higher investment. IRPC (formerly Thai Petrochemical Industry Public Company Limited) was established in 1978 with an initial focus on downstream petrochemicals production. Following its backward integration into the oil refining business, IRPC is the first and only fully-integrated refining and petrochemicals manufacturer in Thailand. It is the second-largest domestic oil refiner and the third-largest petrochemicals producer in the country. After a prolonged period of restructuring following the country’s 1997 financial crisis, IRPC completed recapitalisation at the end of 2005, bringing in new strategic shareholder, PTT. Since then, PTT has effectively controlled and managed IRPC as its single largest shareholder with a 33.7% stake at end 2007, while other government related investors together hold a 30% stake. Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such 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. Contacts: Lertchai Kochareonrattanakul, Bangkok, +662 655 4760; Wasant Polcharoen, +662 655 4763; Vincent Milton, +662 655 4759. 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.