Moody's revises IRPC outlook to stable from negative

Bangkok--18 Aug--Moody's Moody's revises IRPC outlook to stable from negative Approximately US$250 billion of debt securities affected Moody's Investors Service has today changed the ratings outlook on IRPC Public Company Limited (IRPC) to stable from negative. At the same time, Moody's has affirmed IRPC's Baa3 corporate family rating and senior unsecured bond rating. "The revision in its outlook reflects the stabilization evident in the company's earnings and cash flow, as its refinery and petrochemical product spreads recover from their lows," says Renee Lam, a Moody's Vice President and Senior Analyst. "Over the next 12-18 months, IRPC is likely to face continued supply-demand imbalances in the refining and petrochemical industry, and be exposed to execution risks in regard to its sizeable capital expenditure program," says Lam, adding, "But the company's financial profile should remain within the tolerance level for its existing rating, given its continued moderate use of debt." IRPC has planned for a US$1.8 billion capital expenditure program over the next 5 years, aiming to expand into the high-value downstream petrochemical product segments. The execution risks for such investments are balanced by its moderate use of debt. Debt/capital is expected to rise to about 35%, from 30% at end-March 2010, while RCF (retained cash flow)/debt is expected to remain at about 20%. These metrics remain appropriate for IRPC's standalone Ba1 rating. The final Baa3 rating continues to factor in one notch of uplift, based on support from PTT Public Company ltd (A3/negative), IRPC's 36.9% parent. IRPC's close relationship with its parent is manifested by PTT's strategic and financial management oversight through board and management participation, and operational integration. The latter includes long-term crude supply agreements between PTT and IRPC, as well as product swaps between IRPC and various PTT group companies. Given IRPC's hefty investment plans and uncertain industry demand, the rating is unlikely to be upgraded in the next 12-18 months. Over time, it may be upgraded if IRPC successfully completes its investment plans within the planned financial parameters. A consistent maintenance of RCF/debt at over 25% may herald a rating upgrade. The rating may be downgraded if 1) the refining and petrochemical product spreads experience a significant downturn, therefore hampering IRPC's earnings and cash flow generation capability; or 2) IRPC funds its investments by high debt leverage; or 3) the company undertakes aggressive shareholder return initiatives, such that RCF/debt falls consistently below 15-20%. Signs of reduced support from PTT would also be negative for the rating. The last rating action with respect to IRPC was taken on February 20, 2009, when the ratings outlook was changed to negative from stable. The principal methodology used in rating IRPC was Moody's Global Refining and Marketing Rating Methodology, published in December 2009 and available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website. IRPC is the second largest oil refinery and third largest petrochemicals producer in Thailand. It is one of six domestic oil refiners and suppliers of petroleum products in Thailand. IRPC's refinery has a nameplate capacity of 215,000 barrels per day (bpd). At the same location, it also produces naphtha and reformate-based petrochemicals, and is a leading producer of styrene and its derivatives in Thailand. Hong Kong Renee Lam Vice President - Senior Analyst Corporate Finance Group Moody's Investors Service Hong Kong Ltd. JOURNALISTS: (852) 3758 -1350 SUBSCRIBERS: (852) 3551-3077 Hong Kong Gary Lau MD - Corporate Finance Corporate Finance Group Moody's Investors Service Hong Kong Ltd. JOURNALISTS: (852) 3758 -1350 SUBSCRIBERS: (852) 3551-3077 Moody's Investors Service Hong Kong Ltd. 24/F One Pacific Place 88 Queensway Hong Kong China (Hong Kong S.A.R.)