S&P Global in a webinar on January 22, 2024, laid out further detail on their Negative CreditWatch Placement on Thai Oil Public Company Limited (SET: TOP) last December over the delay of the Clean Fuel Project, while also guiding to a plan to resolve this Negative CreditWatch.
During the session, S&P stated that they are re-assessing the extent of group support Thai Oil may receive from PTT Public Co. Ltd. (SET: PTT). The delayed Commercial of Date (COD) of Thai Oil’s Clean Fuel Project (CFP) and related cost overruns will keep the company’s leverage elevated at about three times above the PTT Group’s financial policy.
The credit rating agency noted that the divergence from the group’s financial policy that will have been at least 9 years by the time of the Clean Fuel Project’s COD in Q3-2028 is uncommon for a subsidiary that is assessed as being a ‘highly strategic’ subsidiary. Meanwhile, the agency reiterated that they have yet to see a material step-up in parental support.
The weakness in Thai Oil’s stand-alone creditworthiness is expected to persist by the agency, with the company’s debt-to-EBITDA ratios being above 6.0x at least until the commissioning of the Clean Fuel Project. This will spring from the cost overruns and the absence of earnings contribution from the project.
Lastly, S&P noted that the CreditWatch placement with negative implications reflects the possibility of a downgrade by one notch if the agency believes delay and cost overrun at the Clean Fuel Project will sustainably weaken Thai Oil’s financial standing in the absence of timely group support. S&P Global said that it does not rule out the possibility of more than one notch downgrade.
Still, the agency plans to resolve the CreditWatch during the first 90 days or the half of 2025 when more details on Thai Oil’s plan to resolve the Clean Fuel Project issues are available, which will be when it will assess the resultant impact on Thai Oil’s financial standing. More importantly, the agency will also consider the extent of support from PTT, which is expected to come sooner or later, citing the key event in 2022 that PTT, as a parent company, has supported Thai Oil throughout the transaction of PT Chandra Asri Petrochemical Tbk.
