Taiwan Ratings lowers its long-term CPC ratings

Taiwan Ratings Corp (中華信評), the local arm of Standard & Poor's Ratings Services, lowered its long-term ratings yesterday for Chinese Petroleum Corp (CPC, 中油) in the areas of corporate credit and unsecured corporate bonds.

Taiwan Ratings lowered CPC's long-term corporate credit rating and unsecured corporate bond ratings from "twAAA" to "twAA+."

However, the company's corporate credit rating was removed from CreditWatch status, where it had been placed -- with negative implications -- in June.

"Our downgrade reflects CPC's markedly weakened financial-risk profile resulting from its inability to fully pass on high crude-oil costs to consumers because of the government's inflationary concerns," Daniel Hsiao (蕭黎明), a credit analyst at Taiwan Ratings, said in a report released yesterday.

Despite the company raising its wholesale gasoline prices three times during the first eight months of the year, CPC reported a loss of NT$25.4 billion (US$770.68 million) due to the soaring oil prices.

As oil prices have fallen to US$60 per barrel from a peak of US$77.23 on July 24, CPC is expected to narrow its loss to NT$10 billion this year, company chairman Pan Wenent (潘文炎) said yesterday.

CPC said it would adopt a weekly floating pricing system based on the fluctuation of the price of West Texas Intermediate (WTI) oil. The system will start next week and continue until the end of this year.

Taiwan Ratings also reaffirmed its "twA-1" short-term rating with a negative outlook on CPC.