Fitch Ratings (Thailand) has assigned PTT Public Company Limited's (BBB+/AAA(tha)/Stable) upcoming THB40 billion medium-term debenture programme a National Long-Term Rating of 'AAA(tha)'.
The debentures under the programme will be senior unsecured and will be rated at the same level PTT's National Long-Term Rating, as they will constitute its direct, unsecured, unconditional and unsubordinated obligations.
Key Rating Drivers
'Very Strong' Incentives to Support: Fitch assesses PTT's role in the preservation of government policy as 'Very Strong' as it plays a key role in the nation's energy security. A default would curtail oil and gas availability in Thailand, affecting electricity generation and weakening energy security. We also assess PTT's contagion risk in the event of a default, as 'Very Strong' as we view PTT as a reference issuer for the state and government-related entities (GREs). A default would have material financial consequence for the state and GREs.
'Strong' Responsibility to Support: We assess the government's decision-making and oversight over PTT as 'Strong', as PTT is 63% directly and indirectly owned by the state. The state has broad control over the business strategy and key investment decisions but allows PTT to operate as a commercial entity. We assess the precedents of state support as 'Strong'. We believe the government's support to peer GREs in the important power sector indicates support will be available to PTT.
Moderating, Yet Solid Earnings: We expect EBITDA to soften in 2025 on smaller contribution from the upstream business due to lower oil and gas prices, and the petrochemical business's slow recovery. However, EBITDA is likely to remain strong at about THB355 billion in 2025 (2024: THB363 billion), above that in 2016-2020. We expect petrochemical EBITDA to remain low in 2025 as spreads are likely to stay weak amid uncertain Chinese demand, slowing global growth and industry overcapacity. Rising trade tensions could put more pressure on demand.
High Capex: Fitch expects PTT's consolidated capex to remain high, driven by upstream capex. Capex for PTT Exploration and Production Public Company Limited (BBB+/Stable), its upstream subsidiary, will increase to about USD7.7 billion-USD7.8 billion per year in 2025 and 2026 from USD6.8 billion in 2024. Higher capex in 2026-2027 will also be driven by delays in construction of Thai Oil Public Company Limited's (A+(tha)/Negative) refinery upgrade and expansion project, Clean Fuel Project, which has resulted in cost overruns of about USD1.8 billion.
Strong Financial Position: We expect PTT's financial profile to remain robust and well within its ratings, despite our forecast of rising capex and normalising oil and gas prices. PTT's strong balance sheet means the impact from the 2025 share buyback of up to THB16 billion on its financial profile will be minimal with Fitch estimating an increase in leverage of around 0.04x. PTT's EBITDA net leverage is likely to increase to about 1.9x-2.0x in 2025-2026, from 1.6x in 2024, but financial leverage should stay consistent with PTT's current ratings.
Integrated Gas Value Chain: PTT's upstream operation focuses on natural gas assets to ensure gas-supply security. PTTEP plans to boost production by CAGR of 3% over the next five years to reach output of 806,000 barrels of oil equivalent per day (boed) by 2029 (2024: 696,000 boed). Its focus on natural gas production (2024: 73% of production) bridges conventional and alternative energy sources.
PTT's gas transmission, together with sale and distribution to power producers and gas separation plants, generates stable cash flow, underpinned by steady demand and long-term sales agreements with take-or-pay conditions on a cost-plus pricing structure. Earnings from natural gas sales to industrial users are more volatile as pricing adjustments to the long-term contracts lag that of product prices. LNG imports are supplied to end-users via LNG receiving terminals and gas pipelines, which are operated solely by PTT, with regulated fixed-fee charges.
Transition Strategy: PTT will continue to focus on the strengths in its hydrocarbon and power businesses to support national energy security. At the same time, it will review its non-hydrocarbon operations. PTT's non-hydrocarbon business is focused on EV charging stations, life sciences and technology, as well as logistics. It also intends to enter new businesses, including carbon capture and storage and hydrogen to support its long-term growth and sustainability target.
Fitch views PTT's plan for energy transition as reasonably balanced between the need for the transition and execution risks. PTT will focus on business lines that have solid demand throughout most of the energy transition, while cautiously expanding into non-hydrocarbon businesses that will require more developed technologies and infrastructure.
Peer Analysis
PTT's ratings will remain equalised with those of the sovereign under Fitch's Government-Related Entities Rating Criteria if the Standalone Credit Profile (SCP) weakens, provided our assessment of PTT's strong likelihood of receiving state support under the criteria remains unchanged.
We assess the impact of a PTT default on the preservation of the government's policy role as 'Very Strong', similar to Indonesia's PT Pertamina (Persero) (BBB/Stable), based on their important roles in the respective oil and gas sectors and overall energy security. We also assess the contagion risk to the government should PTT default as 'Very Strong', similar to Pertamina, because we also view PTT as a reference issuer for the financing market relevant to the government.
We assess the sovereign's responsibility to support PTT as 'Strong', compared with 'Very Strong' for Pertamina, as see tighter government control of Pertamina than of PTT. Pertamina also receives subsidies and compensation reimbursements for meeting the state's public-service obligations, which are approved by the parliament. There has been no financial support to PTT in the past due to its strong financial position, although the government's previous support to PTT's immediate peer GREs indicate that support would be available to PTT.
Key Assumptions
Fitch's Key Assumptions Within Our Rating Case for the Issuer:
Benchmark Brent crude at USD65/bbl in 2025, 2026 and 2027, and USD60/bbl in 2028
Exploration and production business sales volume to increase by about 4.5% CAGR in 2025-2028 (2024: 5.8%)
EBITDA from the refinery and petrochemical business to remain weak in 2025
Capex to increase in 2025-2027 (2024: THB189 billion)
Share buyback of THB16 billion in 2025
Dividend payout ratio at about 50%-55%.
RATING SENSITIVITIES
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 EBITDA net leverage 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 Rating Action Commentary of 8 November 2024:
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
Public Finances: Reduced confidence in the ability to narrow the fiscal deficit and stabilise the general government debt/GDP ratio over the medium term.
Structural Features: Heightened political disruption on a scale sufficient to alter Thailand's economic policymaking effectiveness and growth prospects, or affect its tourism recovery.
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 non-financial private-sector debt.
Public Finances: A material decline in the general government debt/GDP ratio, for example, due to smaller fiscal deficits and/or improving medium-term growth potential.
Liquidity and Debt Structure
PTT's liquidity is supported by available cash of THB446.1 billion at end-2024, against THB188.2 billion of debt maturing within 12 months. Its liquidity is also supported by solid cash flow generation, and access to the debt capital markets and bank funding. PTT's consolidated debt maturity profile remains comfortable, with an average term to maturity of about 10 years.
Issuer Profile
PTT is Thailand's integrated national oil and gas company. It operates across the entire oil and gas value chain through its subsidiaries, including upstream, midstream, refining and retail, and chemicals. PTT has also diversified into power generation.
Date of Relevant Committee
17 April 2025
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Public Ratings with Credit Linkage to other ratings
PTT's ratings are equalised with those of the Thai sovereign, based on Fitch's GRE criteria.
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Click here to access Fitch's latest quarterly Global Corporates Macro and Sector Forecasts data file which aggregates key data points used in our credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included.
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