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Fitch Ratings pats CPC on the back

Fitch Ratings announced yesterday that it had assigned ratings with stable outlooks to CPC Corp, Taiwan (CPC, 台灣中油) to reflect the state-run refiner's key role in the nation's plan to develop the petrochemical industry as well as its dominant market share.

Fitch gave CPC an "A+" long-term foreign currency rating and an "F1" short-term foreign currency rating, as well as an "AAA(twn)" national long-term rating and an "F1+(twn)" national short-term rating.

The British ratings agency also assigned unsecured ratings of "AAA(twn)" to CPC's corporate bonds totalling NT$23.9 billion (US$718 million).

The outlook on all ratings is stable, Fitch said in a statement released yesterday.

"CPC is a key player in Taiwan's oil and gas market, being a commercial enterprise highly affected by government energy policy," said Ma Shang (馬上), an associate director in Fitch's Asia-Pacific energy and utilities team.

"The ratings reflect its status as the key public service vehicle to execute Taiwan's ambitious plans to enhance its petrochemical and refining capacity in order to secure its domestic refined oil products and natural gas supply," Ma said.

Fitch said the ratings take into consideration the government's 100 percent ownership of CPC, which gives the company unique advantages, including a monopoly over the natural gas and liquid natural gas market and strong access to funding from local banks.

The stable outlook indicated anticipation that CPC would improve its business and financial profile this year, underpinned by the new floating pricing system introduced in January, which has helped its first-quarter pre-tax income to rebound to NT$6.9 billion with a 3.8 percent margin, Fitch said.

However, Fitch noted that the refiner's credit metrics may be challenged by an anticipated NT$126 billion in capital expenditure through to 2010, as well as an expected increase in domestic competition.

Any sign of deterioration in state support is likely to affect the rating, Fitch said.
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