Fitch Affirms Thailand-Based PTT at ‘BBB+’/’AAA(tha)’; Outlook Stable; Corrects Error

Fitch Ratings has affirmed Thailand-based PTT Public Company Limited’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) at ‘BBB+’, its National Long-Term Rating at ‘AAA(tha)’ and National Short-Term Rating at ‘F1+(tha). The Outlook is Stable. The agency has also affirmed the ‘AAA(tha)’ rating on PTT’s senior unsecured debentures and THB150 billion medium-term debenture programme.

PTT’s ratings reflect its Standalone Credit Profile (SCP) of ‘bbb+’, which is at the same level as the Thai sovereign rating (BBB+/Stable). PTT’s ratings will remain equalised with those of the sovereign under Fitch’s Government-Related Entities (GREs) Rating Criteria if the SCP weakens, provided our assessment of PTT’s strong likelihood of receiving state support under the criteria remains unchanged. PTT’s SCP reflects its resilient credit profile underpinned by an integrated business model and a strong financial position.

PTT’s strong credit metrics provide adequate SCP headroom for its expansion plan and strategy implementation. Fitch expects PTT’s net debt/EBITDA to increase to 1.8x-2.0x in 2022-2024 from 1.4x in 2021, as capex will continue to increase and oil and gas prices normalise. Fitch expects the oil and gas, and chemical businesses will remain PTT’s core growth engines in 2022-2030, although the company plans to expand into new energy and other businesses beyond the energy industry.

In addition, Fitch has discovered an error in the application of the GREs Rating Criteria, which says that PTT’s Short-Term IDR should be equalised with that of the sovereign, when PTT’s Long-Term IDRs are equalised with those of the government.

Fitch upgraded Thailand’s Short-Term IDRs to ‘F1’ from ‘F2’ in May 2019, but missed applying the same action to PTT’s Short-Term IDR. Fitch has corrected the error, resulting in an upgrade of PTT’s Short-Term IDR to ‘F1’ from ‘F2’. All the other ratings of PTT are unchanged, including our assessment of PTT’s ‘bbb+’ SCP, following the discovery of the error.

Strong State Linkage: Fitch now assesses PTT’s status, ownership and control by the sovereign as ‘Strong’, aligned with the assessment for other rated GREs in Thailand and the rest of APAC. Although the state allows PTT to operate as a commercial entity, the government has broad control over its major business strategy and investment decisions. We assess the record of state support as ‘Strong’. There has been no tangible financial support from the state due to PTT’s strong financial position, but we believe support would be forthcoming, if needed, in light of PTT’s strategic role in Thailand’s oil and gas sectors.

Strong Incentive to Support: We believe the socio-political implications of a default by PTT are ‘Strong’, as a default would significantly affect gas availability in Thailand, which in turn could reduce electricity generation and the country’s energy security. We also see the financial implications of a default as ‘Strong’, as PTT is a major state-owned debt borrower and bond issuer in Thailand and a default could limit domestic and foreign financing options and increase financing costs for the state and GREs.

High Energy Prices Support Earnings: Fitch expects PTT’s EBITDA to remain strong at about THB413 billion in 2022 (2021: THB415.4 billion), supported by its upstream operation. Oil and gas prices are likely to continue to rise, while we expect PTT’s upstream sales volume to increase by about 7% in 2022. This should offset expected weaker operating cash flow from its gas and downstream businesses. Its gas business is likely to be pressured by a jump in gas costs, while petrochemical spreads are likely to moderate in 2022 on new supply and slower demand growth.

High Investments: PTT’s acquisitions increased substantially in 2021 to a record high of THB209.3 billion, driven by acquisitions of upstream, petrochemical and refinery, and power subsidiaries. However, its net debt/EBITDA was lower than Fitch expected, thanks to strong recovery in EBITDA. Fitch expects PTT’s consolidated capex to climb further in 2022 (2021: THB192.7 billion). We believe the company is likely to continue seeking acquisitions to expand its business and market, and facilitate low-carbon transition plans.

Upstream Continues to Grow: PTT’s subsidiary, PTT Exploration and Production Public Company Limited (PTTEP, BBB+/Stable), plans to increase production by CAGR of 5% over the next five years, and reach output of 700,000 barrels of oil equivalent per day (boed) by 2030 (2021: 495,000 boed). It will continue to focus on natural gas production (2021: 73% of production), which bridges conventional and alternative energy sources.

As a result, PTTEP’s capex will increase. However, Fitch expects acquisitions of upstream assets to slow as the company has revised its plan to maintain proved reserves life more than five years from seven years (2021: 7.5 years).

LNG Value Chain Expansion: PTT aims to raise its liquefied natural gas (LNG) imports for local and international trade to about 9 million tonnes per annum (mtpa) by 2030. These will mostly be under long-term contracts. Currently, PTT has 5.2mtpa of LNG supply under long-term contracts. In addition to expanding LNG receiving terminals, PTT also plans to build its eighth gas separation plant.

New Energy Business: PTT plans to diversify into new energy businesses, such as renewable power, energy storage and related systems, and the electric-vehicle (EV) value chain, and enter new businesses, including life sciences, technology and digitalisation, and logistics and infrastructure. The company expects to raise its renewable capacity to 12GW by 2030. PTT group budgets about 32% of its capex for 2021-2030 for new energy and other new businesses and targets net profit contribution from these businesses to be higher than 30% by 2030 (2021: nil).

Dominance in Gas Business to Continue: Fitch expects PTT to remain dominant in the gas business in Thailand for the medium term, although other companies are allowed to import LNG for local distribution. The imports will be supplied to end-users via LNG receiving terminals and gas pipelines, which are now operated solely by PTT, with regulated fixed-fee charges. PTT’s long-term LNG supply contracts with offshore producers and its import record give it advantages against competitors.

Stable Cash Flow from Gas: PTT’s financial profile benefits from relatively stable cash flow in its natural gas business, including gas transmission, and sale and distribution to power producers and gas-separation plants, which is underpinned by steady demand and long-term sales agreements with take-or-pay conditions on a cost-plus pricing structure. The earnings of gas-separation plants and natural gas sales to industrial users are more volatile, as adjustments to the cost of gas purchases – which are based on long-term contracts – lag that of product prices.

PTT’s ratings will remain equalised with those of the sovereign under Fitch’s Government-Related Entities Rating Criteria if the SCP weakens, provided our assessment of PTT’s strong likelihood of receiving state support under the criteria remains unchanged

We assess PTT’s status, ownership and control as ‘Strong’, in line with that of other major state-owned oil and gas companies in Asia, such as Oil India Limited (BBB-/Negative) and Korea Gas Corporation (AA-/Stable). We assess PTT’s support record factor as ‘Strong’, in line with that of Malaysia’s Petroliam Nasional Berhad (PETRONAS) (BBB+/Stable), which has also received only limited tangible financial support in light of its strong financial profile. However, we believe both companies are likely to receive support, if needed.

We assess PETRONAS’s and China National Petroleum Corporation’s (CNPC, A+/Stable) socio-political implications of default as ‘Very Strong’, based on their importance to the economy and the state, while PTT’s ‘Strong’ assessment reflects its lower market share in petroleum product sales of around 40% in Thailand, with private operators competing in this space.

Fitch assesses the financial implications of default for PTT as ‘Strong’, compared with ‘Very Strong’ for PETRONAS and CNPC, because PTT is not viewed as close to being a proxy government borrower as PETRONAS and CNPC, despite being one of Thailand’s key GRE borrowers.

Fitch’s Key Assumptions Within Our Rating Case for the Issuer:

  • Benchmark Brent crude at USD100/barrel (bbl) in 2022, USD80/bbl in 2023, USD60/bbl in 2024 and USD53/bbl in 2025 and thereafter
  • Exploration and production business sales volume to increase by about 4% CAGR in 2022-2026 (2021: 18%)
  • EBITDA from the refining business (excluding inventory gains/losses) to recover in 2022
  • EBITDA from the gas and petrochemical businesses to soften in 2022
  • Capex to increase in 2022-2023 (2021: THB193 billion)
  • Dividend payout ratio at about 50%.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

  • An upgrade of Thailand’s IDR, provided the likelihood of support remains intact

Factors that could, individually or collectively, lead to negative rating action/downgrade:

  • A downgrade of Thailand’s ratings

Factors that May Lead to a Deterioration in PTT’s SCP:

  • Large debt-funded investment or weaker operating cash flow, resulting in a sustained deterioration in FFO net leverage to over 2.8x or net debt/EBITDA to over 2.5x.
  • Adverse changes to regulations, gas sales contracts or pipeline tariffs.

For the sovereign rating of Thailand, the following sensitivities were outlined by Fitch in its ratings action commentary of 20 December 2021:

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade:

  • Macroeconomic: An improvement in medium-term growth prospects without a significant rise in household debt.
  • Public Finances: Improved prospects for a decline in the general government debt to GDP ratio from post-pandemic fiscal consolidation and/or improving medium-term growth potential.

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade:

  • Public Finances: A more significant increase in the general government debt ratio compared with our current projections, for example, due to a prolonged fiscal deterioration, or the crystallisation of contingent liabilities on the sovereign balance sheet.
  • Structural Features: Heightened political disruption on a scale sufficient to impact Thailand’s economic prospects.

International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from ‘AAA’ to ‘D’. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit

Strong Liquidity: PTT’s liquidity is supported by available cash of THB344.1 billion at end-2021, against THB99.4 billion of debt maturing within 12 months. Its liquidity is also supported by undrawn committed bank credit facilities of THB70.8 billion at end-2021, solid cash flow generation and access to the debt capital markets and bank funding. PTT’s debt maturity profile remains comfortable, with an average term to maturity of 10.7 years.

PTT is Thailand’s national integrated oil and gas company and its largest company by revenue. The company operates across the entire oil and gas value chain through its subsidiaries, including upstream, midstream, refining and retail, and chemicals. PTT is also involved in power generation. PTT is 63% directly and indirectly owned by the Ministry of Finance.

The principal sources of information used in the analysis are described in the Applicable Criteria.

PTT’s ratings are equalised with those of the Thai sovereign, based on Fitch’s GRE criteria.

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of ‘3’. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch’s ESG Relevance Scores, visit

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Source: Fitch Ratings

Symbol: PTT