Fitch Upgrades Thai Olefins’ Bonds; Expects to Assign Ratings to PTT Chemical

Fitch Ratings (Thailand) Limited has today upgraded the National Long-term rating on Thai Olefins Plc’s (“TOC”) senior secured bonds to ‘A(tha)’ from ‘A-(tha) (A minus(tha)). TOC’s secured ratings remain on Rating Watch Positive, where they were placed on 14 March 2005, pending the amalgamation with National Petrochemical Plc (“NPC”, rated ‘AA-(tha)’ (AA minus(tha)), Negative Watch). The agency also expects to assign the following ratings to the amalgamated entity, PTT Chemical, formed by the amalgamation of TOC and NPC, on its incorporation: National Long-term ‘A+(tha)’, National Short-term ‘F1(tha)’ for senior unsecured debts including that to be assumed from NPC, as well as National Long-term ‘AA-(tha)’ (AA minus(tha)) for senior secured bonds to be assumed from TOC. The upgrade of TOC’s senior secured bond ratings reflects the strengthening in the company’s financial position due to its better-than-expected operating performance from the strong pricing environment and the start-up of its second olefins plant in late 2004. TOC’s financial position has recovered strongly over the past three years with its net debt/EBITDA ratio falling to less than 1.0x at end-June 2005. Although TOC’s future financial leverage is likely to increase, its strengthened balance sheet and expected favorable price environment should provide the financial flexibility to support its ambitious capex plans for 2005 and 2006. Revenue contribution from new downstream projects from 2007 onwards should also support the stability of TOC’s earnings in the long term. The company intends to keep its long-term total debt/EBITDA ratio at less than 2.5x and net debt/EBITDA ratio at less than 2.0x. The ratings of TOC also take into consideration strong support from its principal shareholder – PTT Plc. (rated ‘AA+(tha)’, Positive Outlook) – via long-term feedstock and ethylene offtake agreements, an increase in its feedstock flexibility from its second gas-based olefins plant, as well as secured olefins sales agreements. Key credit concerns include the highly cyclical nature of the petrochemicals industry, execution risks arising from new downstream projects, its large capex plans, as well as high exposure to a single market. Fitch says the ratings it expects to assign to the new entity, PTT Chemical, are based on its projected rise in importance to PTT as its single flagship company in the gas-based olefins business, the increased scale of operation after the amalgamation, as well as its relatively strong pro-forma financial position. PTT Chemical will assume all assets, debts, obligation and liabilities of TOC and NPC. Based on 1H05 financial statements, Fitch estimates net debt/last-twelve-month EBITDA ratios of PTT Chemical at 0.5x (TOC: 0.8x, NPC: 0.1x). Despite the large capex plans and dividend payout, its financial leverage should remain relatively strong at less than 2.0x for net debt/EBITDA ratio. PTT will likely hold about 44% in PTT Chemical, followed by Siam Cement Plc. with 18%. Contact: Orawan Karoonkornsakul, Pimolpa Simaroj, Vincent Milton; Bangkok, Tel: +662 655 4755. Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with sub- or low-investment grade international sovereign ratings. The best risk within a country is rated ‘AAA’ and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as ‘AAA(tha)’ for National ratings in Thailand. Specific letter grades are not therefore internationally comparable. Fitch’s rating definitions and the terms of use of such ratings are available on the agency’s public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch’s code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the ‘Code of Conduct’ section of this site. End.

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