Bangkok--17 Feb--Fitch Ratings
Fitch Ratings (Thailand) Limited has today assigned a ‘AAA(tha)’ National Long-term rating to PTT Public Company Limited’s (PTT) new 15-year unsecured and unsubordinated debentures with the issue size of up to THB15bn.
The ratings reflect PTT’s dominance in Thailand’s gas and oil business, as well as its strategic importance and function as a policy vehicle for the country’s energy security and development. Fitch views PTT as very likely to maintain its natural monopoly in gas transmission and distribution. 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.
PTT’s ratings are also supported by its good management track record and 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.
Nevertheless, the company’s credit profile is tempered by its vulnerability to fluctuations in commodity prices, significant budgeted capital expenditure, exposure to regulatory and political risks, as well as some foreign exchange risk. Fitch also notes that PTT has budgeted THB229bn for its five-year investment plan (2009-2013). With a continuing large capex plan and expected weak earnings in 2009, the company’s 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.
PTT reported a consolidated operating EBITDAR of THB134.1bn for the first nine months of 2008, up 19.3% yoy, thanks mainly to solid growth in PTTEP and its gas business. The operating EBITDAR from PTTEP and gas business accounted for 94% of consolidated operating EBITDAR in 9M08. Although PTT’s net debt increased to THB161.1bn at end-September 2008 (end-2007: THB146.2bn), due to continued large capex, its adjusted net debt to last-twelve-month operating EBITDAR and LTM funds from operations adjusted net leverage were stable at 1.0x and 1.1x, respectively.
Contacts: Lertchai Kochareonrattanakul, Bangkok, +662 655 4760; Steve Durose, Sydney, +612 8256 0307; Vincent Milton, Bangkok, +662 655 4759.