SINGAPORE (S&P Global Ratings) Jan. 31--S&P Global Ratings said today
that its rating and outlook on PTT Global Chemical Public Co. Ltd. (PTTGC:
BBB/Stable/--) are not affected by the company's potential investment in an
ethylene cracker project in the U.S. The project is still at the planning
stage and its impact on PTTGC's operations and finances will likely show only
in 2020 and beyond--if the Thai chemicals producer proceeds with the
investment. PTTGC expects to take the final investment decision in 2019.
PTTGC has signed a 50/50 heads of agreement with Korean conglomerate Daelim
Industrial Co. Ltd. for the project. Daelim will conduct a feasibility study
of an ethylene cracker plant, with total capacity of 1.5 million tons per year
and a downstream polyethylene facility, to be built in the state of Ohio in
the U.S. It includes the front-end engineering design; engineering,
procurement, and construction bidding; and funding of the project.
"We would regard the U.S. ethylene cracker project as marginally negative for
PTTGC's earnings during the construction phase. That is because of the
inherent execution risks associated with projects of this scale, especially in
a geography in which the company has no operations. Also, it's too early to
gauge if such projects can retain their currently solid profitability beyond
the next five years, amid a flurry of capacity additions in the U.S. over the
next three years," said a statement.