Fitch Upgrades PTT's Foreign Currency IDR to 'BBB+'

Stocks and Financial Services Press Releases Monday March 11, 2013 14:17
Bangkok--11 Mar--Fitch Ratings

Fitch Ratings has upgraded Thailand-based PTT Public Company Limited's (PTT) Long-Term Foreign-Currency Issuer Default Ratings (IDR) to 'BBB+' from 'BBB' and its Short-Term Foreign-Currency IDR to 'F2' from 'F3'. The Outlook is Stable. At the same time, the agency has affirmed PTT's Long-Term Local-Currency IDR at 'A-', National Long-Term rating at 'AAA(tha)', and National Short-Term rating at 'F1+(tha)'. The Outlook is also Stable. The National Long-Term rating on its senior unsecured debentures has been affirmed at 'AAA(tha)'.

The upgrade of PTT's Foreign Currency IDRs follows the upgrade of Thailand's Long-Term Foreign Currency IDRs on 8 March 2013.
Key Rating Drivers

PTT's ratings reflect its dominant position in Thailand's oil and gas industry, its strategic importance and function as a policy vehicle for domestic energy security and development, and a financial profile adequate for the current ratings. PTT is the sole operator of Thailand's mid-and-downstream gas operations and its key product, natural gas, is a major fuel for the country's electricity generation. PTT is also one of the country's major exploration and production (E&P) companies, and a leading refining and petrochemicals company.

PTT's credit profile is tempered by its vulnerability to fluctuations in commodity prices, significant capex plans, and negative free cash flow (after dividend payout) generation expected at least till 2014. Following a series of acquisitions, PTT's leverage (as measured by net adjusted debt to fund flow from operations) has increased to and is likely to remain around 2.0x-2.2x in the medium-term. This is a level Fitch views as appropriate for its standalone credit assessment of 'A-' considering large and stable cash flows from its gas interests in Thailand.

Following the upgrade, PTT's Long-Term Foreign-Currency IDR is still constrained by that of Thailand's, given the state's direct 51% ownership of the company. Under its parent-subsidiary methodology, Fitch rates PTT on a bottom-up basis, and would provide a single-notch uplift on its standalone profile to reflect implicit support from the state. However, given the current ratings of Thailand, such rating uplift is not at present relevant to the ratings of PTT.

For more information, refer to Fitch's rating action commentary 'Fitch affirms PTT Public Company at 'A-'/'BBB'; Outlook Stable' dated 15 November 2012 and the full rating report dated 31 December 2012, both available on www.fitchratings.com

Rating Sensitivities
Positive: Future developments that may, individually or collectively, lead to positive rating action include
-upgrade of Thailand's IDRs
Negative: Future developments that may, individually or collectively, lead to negative rating action include,

-adverse changes to regulations and to gas sales contracts and pipeline tariffs, large debt funded investments resulting in a sustained deterioration in financial FFO adjusted net leverage over 2.25x for PTT's standalone IDRs of 'A-'

-downgrade of Thailand's IDRs

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