TRIS Rating has affirmed the company and senior debenture 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 BCP’s refining and marketing businesses, its diversification into solar power business, and the support from PTT PLC (PTT). The ratings are partially weighed by the typical fluctuations in oil prices and the gross refining margin (GRM). The “stable” outlook reflects the expectation that BCP will sustain its strong market position in the oil retailing segment. The investments in solar power projects are expected to help generate reliable streams of income and partially offset the fluctuations in the oil business over the medium term.
BCP was established in 1985 and listed on the Stock Exchange of Thailand (SET) in 1993. The company owns and operates a complex oil refinery, located in Bangkok. The refinery has a capacity of 120 thousand barrels per day (KBD), accounting for approximately 11% of the total refinery capacity in Thailand. The company operated 1,068 service stations nationwide as of September 2013 under the “Bangchak” brand. BCP also operates 70 megawatts (MW) solar power plants. For the first nine months of 2013, the refinery segment generated 70% of BCP’s EBITDA (earnings before interest, tax, depreciation, and amortization), the marketing segment (sales through service stations and industrial customers) comprised 17%, while the solar power segment accounted for the remaining 13%. As of September 2013, PTT held 27.22% interest in BCP, the Ministry of Finance (MOF) held 9.98%, and the remaining 62.80% was held by the public.
BCP’s strong business profile reflects the integration of its complex refinery with its marketing network. As a complex refinery, BCP is able to process a variety of crude oils, yielding high proportions of high GRM products such as diesel fuel and JET fuel. For the first nine months of 2013, crude intake was ramped up to 98.7 KBD from 73.7 KBD in 2012. The company’s refined product mix was diesel (48%), gasoline (20%), fuel oil (18%), and jet fuel (11%). The base GRM was US$6.1 per barrel for the first nine months of 2013. The uncertainty of the global economy has put pressure on the oil prices and the GRM.
The total volume of refined products sold by BCP’s marketing segment have increased, rising from 375 million liters per month (ML/MO) for the first nine months of 2012 to 403 ML/MO for the first nine months of 2013. Refined products sold through BCP’s service stations accounted for 60% of the total sales volume. The remainder (40% of the sales volume) was sold directly to industrial customers. For the first nine months of 2013, BCP was the third largest oil retailer in Thailand, with a market share of 14.8%, up from 13.8% for the first nine months of 2012.
BCP has diversified into solar power business since 2011. BCP has power purchase agreements totaling 118 MW. Each contract included a tariff adder of Bt8 per kilowatt-hour (kWh). As of September 2013, 70 MW of capacity was in operation and 48 MW of capacity was under construction. The plants under construction are expected to be completed within 2014. Once all the 118 MW of solar power generating capacity are in operation, BCP expects its solar power plant to generate about Bt2,500-Bt2,800 million of EBITDA per year, or about 20%-25% of the company’s expected EBITDA. Cash flow generations from the solar power business are expected to serve as a cushion to protect the company’s profits from the volatility of the oil refining and marketing segments.
BCP’s financial profile during 2012 through the first nine months of 2013 was in line with TRIS Rating’s expectation. For the first nine months of 2013, BCP’s total revenue increased by 14.1% year-on-year (y-o-y) to Bt138,450 million, as higher sales volume largely offset a decrease in oil prices. The operating margin (operating income before depreciation and amortization as a percentage of sales) was 4.2% for the first nine months of 2013. BCP’s capital structure remained satisfactory, with total debt to capitalization ratio at 37.2% as of September 2013.
For the next three years, TRIS Rating’s base-case expects the company’s EBITDA to stay in a range of Bt7,000-Bt10,000 million per year, based on the crude intake of 100 KBD and the base GRM at about US$6.5 per barrel on average. BCP’s total capital expenditures during 2013 to 2016 are expected at approximately Bt26,400 million. The expenditures are designated for solar power projects, refinery improvements and debottlenecking program, plus the expansion of BCP’s marketing network and renewable energy business. Given the expected levels of EBITDA and capital expenditures, BCP’s total debt to capitalization ratio may increase slightly during the investment period. However, TRIS Rating expects that the ratio will not exceed 45% over the next three years.
TRIS Rating Co., Ltd./www.trisrating.com Contact: santaya@trisrating.com, Tel: 0-2231-3011 ext 500/Silom Complex Building, 24th Floor, 191 Silom Road, Bangkok 10500, Thailand Copyright 2013, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information. All methodologies used can be found at http://www.trisrating.com/en/rating_information/rating_criteria.html.