TRIS Rating has affirmed the company and issue ratings of The Bangchak Petroleum PLC (BCP) at “A-” with “stable” outlook. The ratings reflect the proven operating record of BCP’s refinery, the integration of the refining and marketing businesses, BCP’s diversification into other energy-related businesses, and the support BCP receives from PTT PLC (PTT). The ratings also take into consideration BCP’s ability to manage its operation after the fire accident, the fluctuations in oil prices and gross refining margins (GRM), and the uncertainty of global economy.
The rating affirmation is to remove the CreditAlert with “negative” implication placed on the company and issue ratings of BCP since 6 July 2012, following the fire accident at BCP’s refinery on 4 July 2012. After the CreditAlert removal, TRIS rating assigns “stable” outlook for the ratings of BCP with an expectation that BCP will smoothly operate its complex refinery and sustain its market position in the retail segment.
The “stable” outlook reflects the expectation that BCP will smoothly operate its complex refinery and sustain its market position in the retail segment. The investments in solar power projects will generate reliable streams of income and partially offset the fluctuations in the refining segment.
BCP was established in 1985 and listed on the Stock Exchange of Thailand (SET) in 1993. The company owns and operates an oil refinery, located in Bangkok, with a capacity of 120 thousand barrels per day (KBD). The company operates service stations under the “Bangchak” brand nationwide, with 1,063 stations as of September 2012. BCP also operates a 38 MW solar power plant located in Bang pa-In, Ayudhya. As of September 2012, PTT held 27.2% interest of BCP, the Ministry of Finance (MOF) held 10.0%, and the remaining 62.8% was held by the public.
As a complex refinery, BCP is able to process a variety of crude oils, especially heavy and sour crude. The complex refinery also yields high proportions of valuable products. For the first nine months of 2012, the company’s product mix was diesel (54%), gasoline (20%), fuel oil (13%), and jet fuel (11%). Refined products sold by its marketing arm through its service stations accounted for approximately 60% of total sales volume. The remainder (40% of sales volume) was sold to industrial customers. In the first nine months of 2012, BCP was the third largest oil retailer in Thailand with a market share of 13.8%.
On 4 July 2012, there was a fire accident at BCP’s refinery. The entire refinery ceased operation for 10 days. The fire was ignited at the gas oil stripper near by the 80 KBD crude distillation unit (CDU). This unit was shut down for almost four months and resumed operation on 6 November 2012. The property damage caused by the fire is estimated at approximately Bt800 million, which is expected to be mostly covered by an insurance claim, while its business interruption claim is in negotiation process. The fire incident has had little impact on BCP’s overall performance. Although crude intake fell to 70.0 KBD in the first nine months of 2012, from 85.7 KBD in 2011, its earnings before interest, tax, depreciation and amortization (EBITDA) from refining business was Bt3,971 million. BCP’s base GRM was impressive at US$14.03 per barrel during the third quarter of 2012 due to the widened spread of refined products price to crude prices and BCP’s ability to adjust crude intake to yield more high value products such as diesel. In the third quarter of 2012, the refinery product mix was diesel (57%), gasoline (21%), fuel oil (11%), and jet fuel (9%). Despite a refinery’s shutdown during the third quarter of 2012, BCP’s sales volume through its marketing arm decreased only 3.2% (year-on-year —y-o-y) to 339.5 million liters per month (ML/MO). The slight drop reflected BCP’s ability to manage inventory and logistics, as well as the cooperation among refineries affiliated with PTT. The company’s sales through service stations continued to grow, rising by 2.7% (y-o-y) to 207.8 ML/MO, while sales to industrial customers decreased by 11.3% (y-o-y) to 132 ML/MO in the third quarter of 2012.
BCP has diversified into the renewable energy business by developing and operating a solar power plant since 2011. BCP has operated a 38 MW solar power plant. This site suspended operations in mid-October 2011 due to the severe flood. After the flood, all damaged properties were repaired and replaced. All costs associated with the flood damage were covered by insurance and by the construction contractor. The first 8 MW started up on 2 April 2012, while the remaining 30 MW started up on 16 July 2012. This plant is expected to contribute Bt400 million of EBITDA in 2012 and Bt740 million of EBITDA per year from 2013 onward. BCP is now developing new solar power plants with combine capacity of 80 MW, expected to start operation in 2013 and 2014. The renewable energy segment will partially cushion the company’s overall EBITDA from the volatility of the oil refining and marketing segments.
For the first nine months of 2012, BCP’s performance remained satisfactory. Despite a refinery shutdown for three months and a wide swing in petroleum prices, the company’s EBITDA was manageable at Bt5,732 million. BCP’s financial profile is sound. Its capital structure remained satisfactory, with a debt to capitalization ratio of 42.2% as of September 2012. BCP’s capital expenditures for new projects between 2013 and 2016 are budgeted at Bt24,300 million in total. The expenditures are for solar power projects, refinery improvements and debottleneck, and an expansion of the marketing network. With EBITDA expected to be Bt7,000-Bt9,000 million per year, BCP’s leverage may slightly increase during the investment period.
Company Rating: A- Issue Ratings: BCP194A: Bt2,000 million senior debentures due 2019 A- BCP224A: Bt1,000 million senior debentures due 2022 A- Rating Outlook: Stable
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