Bangkok--26 Aug--Fitch Ratings Fitch Ratings has today assigned PTT Public Company Limited (PTT) a ‘BBB+’ International Long-term foreign currency Issuer Default Rating (IDR), ‘A’ Long-term local currency IDR and ‘F2’ Short-term foreign currency IDR. The Outlook is Stable. At the same time, Fitch Ratings (Thailand) Limited has upgraded PTT’s National Long-term rating to ‘AAA(tha)’ from ‘AA+(tha)’ and affirmed its National Short-term rating at ‘F1+(tha)’. The agency has also upgraded the National Long-term rating on PTT’s outstanding senior unsecured and unsubordinated debentures amounting to THB88.2bn to ‘AAA(tha)’ from ‘AA+(tha)’. The Outlook is Stable. The ratings reflect PTT’s dominance in the gas and oil business in Thailand, as well as its strategic importance and function as a policy vehicle for the country’s energy security and development. PTT is very likely to maintain its natural monopoly in gas transmission and distribution through its established pipeline network and its long-term lease on the gas pipeline that will be transferred back, helped further by a secure demand via its long-term sales contracts and the high barriers of entry to its capital-intensive business. Through its subsidiary, PTT Exploration and Production (PTTEP), PTT is one of Thailand’s major exploration and production companies, with the country’s largest reserves and second-largest production. PTT also off-takes and resells virtually all of Thailand’s natural gas, and has the largest market share of LPG and oil sales. Fitch notes that the ratings are supported by PTT’s good management track record and its solid cash flow generating capability. The gas interests are the main contributor to its EBITDA, and cash flows from this activity have proven relatively stable, thanks to long-term supply and sales agreements with minimum take-or-pay conditions, a cost-plus pricing structure and generally less volatile gas prices relative to oil prices. The ratings also reflect the state’s implicit support for PTT, which has resulted in the ratings being uplifted by one notch from their stand-alone level. The implicit support is based on the state’s majority ownership, the size, importance of PTT’s activities to Thailand and the company’s near-monopoly position in the local natural gas industry. The National ratings upgrade takes into account, more fully, the state’s implicit support and to be consistent with the new International ratings. PTT’s ‘BBB+’ Long-term foreign currency IDR is capped by Thailand’s Long-term foreign currency IDR, given the state’s majority ownership and its main operations are concentrated in Thailand. PTT continued to report strong EBITDA of THB82.5bn in H108, up 18% yoy, despite the deconsolidation of PTT Chemicals Public Company Limited, thanks mainly to solid growth in its exploration and production (E&P) business and, to a lesser extent, its gas business; Both its gas business and E&P accounted for around 94% of consolidated EBITDA in H108. PTT’s financial position has remained solid; its adjusted net debt to last-12-month EBITDAR remained unchanged at 1.0x for H108 (2007:1.0x) and EBITDA interest coverage improved to 13.5x (2007:11.1x). PTT’s credit profile is tempered by its vulnerability to fluctuation in commodity prices, significant budgeted capital expenditure, and exposure to regulatory and political risks and some foreign exchange risk. PTT has budgeted THB241bn for its five-year investment plan (2008-2012). With a continuing large capex plan, net debt and leverage are expected to increase but its financial position and liquidity should remain strong and in line with its financial policy, targeting a net debt/EBITDA ratio of below 2.0x. The Stable Outlook reflects Fitch’s expectation that PTT will maintain its very strong market positions, in particular in the gas business, and its financial profile will be kept consistent with the current ratings throughout the industry cycle, and that the government maintains a majority stake. The ratings might be downgraded to their standalone level if the links between the state and the company weaken. PTT is the only fully-integrated oil and gas company and the largest corporate in Thailand. Thailand’s Ministry of Finance holds a 52% stake, and an additional 15% indirectly via Vayupak Fund 1, a state fund. 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; Steve Durose, Sydney, +612 8256 0307; Vincent Milton, Bangkok, +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. 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