TEXT-S&P Rates PTT Public Co. Ltd.'s Senior Unsecured Notes 'BBB+'
(The following was released by the rating agency)
SINGAPORE (Standard & Poor's) Oct. 11, 2012 -- Standard & Poor's Ratings Services today assigned its 'BBB+' issue rating to a proposed issue of senior unsecured notes by PTT Public Co. Ltd (PTT: BBB+/Stable/--). The rating on the notes reflects the long-term corporate credit rating on PTT.
The rating on PTT reflects the company's 'bbb' stand-alone credit profile (SACP) and an extremely high likelihood of extraordinary support from the government of Thailand (foreign currency BBB+/Stable/A-2; local currency A-/Stable/A-2; axAA/axA-1) in the event of financial distress.
PTT's business risk profile is "satisfactory," as our criteria define the term. The PTT group dominates all major segments of oil and gas exploration and production; gas transmission, distribution, and separation; and petrochemical and refining in Thailand. PTT's profitability is lower than that of other integrated national energy companies, reflecting the company's dominant marketing and trading business and the transmission-like nature of its gas business.
We expect PTT's cash flow adequacy ratios to moderate in 2012-2014 due to the company's peak capital expenditure requirements of Thai baht (THB) 233.9 billion during this time, mainly for its upstream and gas businesses. This amount does not include the capital expenditure requirements of PTT's majority-owned subsidiary PTT Exploration and Production Public Co. Ltd. (PTTEP: BBB+/Negative/--). It also does not include PTT's investment in PTTEP's equity-raising plan.
We expect PTT to generate negative free operating cash flows on a consolidated basis in 2012 and 2013 and use debt to partially fund the capital investments. Pro forma for the proposed notes issue, we forecast the consolidated average ratio of funds from operations (FFO; not including associate income) to total debt at 30%-35% over 2012-2014. These measures remain adequate for PTT's "intermediate" financial risk profile, as our criteria define the term. The company also maintains some flexibility in its investment plans. About 50% of its planned capital expenditure over 2012-2014 is related to mergers and acquisitions and is discretionary.
The stable outlook on PTT reflects the outlook on the sovereign credit rating on Thailand. We could upgrade PTT if we raise the sovereign credit rating, and the company maintains or improves its SACP. We may downgrade PTT if: (1) we lower the sovereign credit rating on Thailand; (2) the government's shareholding in PTT held by the Ministry of Finance falls below 50%; (3) the government's energy policy shifts significantly, including liberalization of the gas industry, thus eroding PTT's market share; or (4) PTT's SACP weakens by more than four notches, which we consider highly unlikely.
RELATED CRITERIA AND RESEARCH
-- Methodology: Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012
-- Key Credit Factors: Criteria For Rating The Global Midstream Energy Industry, April 18, 2012
-- Standard & Poor's Raises Its Oil Price Assumptions; Natural Gas Price Assumptions Unchanged, March 22, 2012
-- Global Criteria For Rating The Oil And Gas Exploration And Production Industry, Jan. 20, 2012
-- Key Credit Factors: Criteria For Rating The Global Oil Refining Industry, Nov. 28, 2011
-- Rating Government-Related Entities: Methodology And Assumptions, Dec. 9, 2010
-- Stand-Alone Credit Profiles: One Component Of A Rating, Oct. 1, 2010
-- Business And Financial Risks In The Commodity And Specialty Chemical Industry, Nov. 20, 2008
-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
Keywords: MARKETS RATINGS PTTPUBLICCO