Bangkok--13 Jul--Fitch Ratings
Fitch Ratings (Thailand) Limited has today assigned National Long-term ratings of ‘AAA(tha)’ to three new tranches of PTT Public Company Limited’s (PTT) three-year, seven-year and 15-year unsecured and unsubordinated debentures totaling up to THB35bn. The proceeds from these new debentures will be earmarked for working capital, refinancing and capex.
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 second-largest reserves and 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).
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 on a sustained basis.
PTT reported a consolidated operating EBITDAR of THB156.1bn for 2008, up 7.0% yoy, thanks mainly to solid growth in PTTEP and its gas business. Its operating EBITDAR declined to THB26.4bn in Q109, down 28.4% yoy, due mainly to a sharp reduction in product prices. Despite weaker operating cash flow and higher net debt due to continued large capex, its adjusted net debt to last-12-month operating EBITDAR and LTM funds from operations adjusted net leverage remained strong at 1.3x and 1.5x, respectively, at end-Q109.
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.
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