Fitch Ratings announced the maintenance of its long-term foreign currency credit rating. and the long-term domestic currency international credit rating of PTT Public Company Limited (PTT) at BBB+ and the long-term national credit rating (National Rating) at ‘AAA(tha)’ with a stable credit outlook.
Fitch Ratings (Thailand) Company Limited has affirmed the long-term foreign currency credit rating. (International Long-Term Foreign-Currency Issuer Default Rating) and the long-term international credit rating of the domestic currency. (International Long-Term Local-Currency Issuer Default Rating) of PTT Public Company Limited (PTT) at BBB+ and National Long-Term Rating at ‘AAA(tha)’ with a stable credit outlook. Meanwhile Fitch affirms short-term foreign exchange rating (International Short-Term Issuer Default Rating) at F1, National Short-Term Issuer Default Rating of F1+(tha), including the National Long-Term Rating of unsecured and subordinated bonds. and the long-term national credit rating of the Medium-Te
rm Debenture Program, with a total bond value not exceeding one hundred and fifty billion baht. and a project to issue bonds with a total bond value not exceeding one hundred billion baht at AAA(tha)
PTT’s credit rating reflects its Standalone Credit Profile at bbb+, which is at the same level as Thailand’s credit rating (BBB+, Stable Outlook) under the credit rating criteria for organizations with ties to the government. etc. (Government-Related Entities Rating Criteria) of Fitch
PTT’s long-term and short-term ratings will remain the same as Thailand’s rating. If PTT’s standalone credit status is downgraded in the future Fitch considers that the likelihood of receiving support under the above rating criteria is high, unchanged.
PTT’s standalone credit profile reflects its solid credit profile. From the integrated oil and natural gas business of the company Including the company’s strong financial position. Fitch views the oil and natural gas business as and chemicals will remain PTT’s core growth driver u
ntil 2030, and PTT plans to gradually transition into new energy businesses. with low carbon Including other businesses In addition to the energy business more in the future
Factors affecting credit rating
-Very High Support Motivation: Fitch views PTT’s role in supporting government policy. (Preservation of government policy) in the energy sector is at a very high level, with PTT playing an important role in managing the country’s energy security. PTT’s default on debt payments will affect the supply of oil and natural gas for Thailand. which will affect electricity production and cause the country’s energy security to decrease.
In addition, Fitch views that the impact on government borrowing in the event of PTT defaulting on debt payments (Contagion risk) is also very high. This is because Fitch views PTT as a representative of the government sector. and state enterprises that borrows money and issues bonds Therefore, PTT’s default on debt payments will have a significant impact on borrowing both domesti
cally and abroad. and financial costs of the government sector and other state enterprises as well
-High Support Responsibility: Fitch assesses supervision and control. (Decision-making and oversight) of the government sector towards PTT is at a high level. Because the government sector The Ministry of Finance is a major shareholder, both directly and indirectly, holding 63 percent of PTT, although the government has a policy for PTT to conduct commercial business. But it has control over key investment policies and strategies in the broader picture.
In addition, Fitch views that government support (Precedents of support) for PTT is high. Fitch believes that the government sector Financial support has been provided to state enterprises in the electricity business. This is a business that is as important to the country as the energy business. It should make you believe that the government sector should provide support to PTT as well in the event that the company have a need Although there has been no financi
al support for the company in the past because PTT has a strong financial position.
-Higher gas costs of the gas separation plant business: Fitch believes that profits of PTT’s gas separation plant business will decrease and there will be increased volatility. From the government’s adjustment of the natural gas price structure, however, the impact on PTT is likely to be limited. This is because operating profits are before interest, taxes, and depreciation. and amortization (EBITDA) of the gas separation plant business There is a relatively small proportion. This is approximately 6 percent of PTT’s total EBITDA on average over the past 3 years.
-Natural gas costs of the gas separation plant business will be adjusted to be equal to the average cost price of gas from all sources (Pooled gas price), including liquefied natural gas, where the price of liquefied natural gas is normally higher. and is more volatile than gas prices from the Gulf of Thailand and neighboring countries. Therefore, the profit of the g
as separation plant business Will be affected by the price of gas costs. that is more volatile In addition to the already volatile product prices.
-Earnings are weakening But still strong: Fitch expects PTT’s EBITDA to weaken in 2024 due to lower EBITDA from E andP business. It is expected that the price of oil and natural gas will decrease. and the profits of the gas separation plant business will decrease. However, PTT’s EBITDA will remain strong at approximately 365 billion baht in 2024 (2023 is at 400 billion baht) and will be higher than in 2016-2020. It is expected that EBITDA from the oil refinery and petrochemical businesses It is likely to decline slightly in 2024 as the spread between product prices and raw materials for petrochemical products is likely to remain weak. from the uncertainty of the recovery of consumer demand from China Slower global economic growth and the condition of production capacity exceeding demand Meanwhile, oil refining margins are likely to continue to weaken.
-High inves
tment: Fitch expects PTT Group’s investment expenses to remain high. From investment in the petroleum exploration and production business by PTT Exploration and Production Public Company Limited (PTTEP) (BBB+ credit rating, stable credit outlook), which is a subsidiary in this business. The investment plan for the next 5 years has been adjusted, increasing by approximately 15 percent. In addition, PTTEP announced plans to acquire a 25.5 percent stake (indirectly) in an offshore wind power project in Scotland. With an investment of approximately 689 million US dollars.
-Strong Financial Profile: Fitch expects PTT’s financial profile to remain strong. and is consistent with the Company’s current credit rating. Although Fitch expects capital expenditures to increase, In addition, oil and natural gas prices will drop back to normal levels. Fitch expects PTT to have sufficient cash flow from operations to fund investments. Therefore, the ratio of net debt to operating profit before interest, taxes, and depreciati
on is And PTT’s amortization (EBITDA net leverage) should remain at approximately 1.7 times in 2024-2025 (in 2023 it will be at 1.6 times).
-Integrated natural gas business value chain: PTT will continue to expand its petroleum exploration and production business. It will focus mainly on natural gas resources. To stabilize the natural gas supply for Thailand, PTTEP plans to increase petroleum production at a rate of 5 percent per year over the next five years. and increase it to approximately 810,000 barrels of oil equivalent per day by 2028 (by 2023 it will be at 640,000 barrels of oil equivalent per day). The company will continue to focus on natural gas production. (accounting for 72 percent of total petroleum production in 2023) is an important fuel during the transition from fossil energy sources to other alternative energy sources.
Natural gas pipeline business and selling natural gas to power plants and gas separation plants. Have consistent cash flow from operations. As a result of stable demand and
long-term natural gas trading contracts, which specify a minimum purchase amount from the counterparty on a take-or-pay basis, including a price structure that allows the cost of sales to be passed on to customers. But profits from the business of selling natural gas to industrial plants will be more affected by fluctuations in oil and natural gas prices. Due to the adjustment of the price of natural gas costs according to the long-term trading contract. It will be slower than adjusting the product price. In addition, imported liquefied natural gas will be distributed to users. Must pass through a liquefied natural gas receiving station. and natural gas pipeline systems, which PTT is currently the sole operator of. PTT will charge service fees as determined by the Energy Business Regulatory Authority.
-Strategy for energy transition: PTT plans to diversify investment into energy businesses in the future, such as renewable electric power. Energy storage system (Energy Storage) business related to electric car
s and hydrogen energy business Including new businesses such as life sciences and medicine (Life Science), technology and digital. and transportation and infrastructure. The company plans to increase electricity production capacity from renewable energy to 15,000 megawatts by 2030. PTT Group plans to invest in the energy business in the future. and new businesses Representing approximately 32 percent of the investment plan for 2021-2030 and targeting net profits from new businesses These will account for more than 30 percent of the total net profit for the year. 2573.-511.-
Source: Thai News Agency
