Fitch affirms Petronas ratings at A but outlook negative

KUALA LUMPUR: Fitch Ratings affirmed Petroliam Nasional Bhd's long-term foreign- and local-currency issuer default ratings (IDRs) at 'A' and its short-term foreign-currency IDR at 'F1'.
However,
the ratings agency said on Friday the outlook on its long-term
foreign-currency IDR was revised to negative from stable. The outlook
on its long-term local-currency IDR was stable.
"Fitch believes
Petronas remains Malaysia's strongest foreign currency debtor. The
negative outlook on its long-term foreign-currency IDR, however,
reflects the likelihood that Fitch will downgrade this rating to the
same level as that of the sovereign," it said.
The ratings
agency viewed the government's influence on the company's cash
generation as significant through control of gas pricing.
Fitch
also noted Petronas' plan to alter its dividend policy to 30% of net
profit after tax from a fixed dividend of RM30bil per year.
It pointed out reforms to address material change in both dividends and gas pricing as unlikely until after a general election.
To
recap, Petronas is 100%-owned by the government ('A-'/'A'/Stable). Its
current foreign and local currency IDRs are constrained by Malaysia's
'A' country ceiling and local currency IDR, respectively.
Fitch
said the sovereign has growing influence over the company's financial
policies and strategies and Petronas' dividends continue to be very
important to government funding. This weakens the case for rating
Petronas' foreign currency obligations above the sovereign foreign
currency rating.
It said the negative outlook on the foreign
currency IDR reflected the likelihood that Fitch may cap this rating at
Malaysia's sovereign foreign currency IDR of 'A-', rather than at the
country ceiling of 'A'.
"Petronas' financial performance
continues to be adversely affected by production issues, declining
domestic output and the requirement to sell gas at below market prices
but benefits from high oil prices in 2011 and most of 2012," said Sajal
Kishore, director in Fitch's Asia Pacific energy & utilities team.
At the same time, Fitch affirmed Petronas' foreign currency senior unsecured rating at 'A', including debt issued by Petronas Capital Ltd and guaranteed by Petronas. Petronas Global Sukuk Ltd's US dollar trust certificates were also affirmed at 'A'.