ICRA assigned an issuer rating of `IrAA` to Petronet LNG

ICRA assigns an issuer rating of IrAA to Petronet LNG. This rating indicates low credit risk. However, the rating based on the general creditworthiness of the rated entity and not specific to any particular debt instrument.

The rating reflects the strength of Petronet LNG arising from strong and financially sound project participants, including sponsors, the robustness of the contractual structure, and PLL`s demonstrated track record, though limited, in running the regassification facility and generating profits.

The rating also favourably considered the demand for gas in the country and the company`s favourable financial risk profile characterized by moderate gearing level and comfortable debt servicing ability.

However, the rating agency has also considered the project implementation risks inherent in the company`s significant capex programme and the supply risks as LNG is yet to be tied up on a long-term basis for the balance requirement of Dahej expansion.

ICRA also notes that the current Supply Purchase Agreement (SPA) with Rasgas provides for a gradual alignment of the LNG prices to prevailing JCC prices from 2009 onwards, which could expose the project off-takers to a certain degree of market risks, given the likely competition from alternate fuels.

However, ICRA informed that it does not factor in capex associated with any acquisitions that the company may resort to in future. Thus it stated that it will evaluate the credit implications of such acquisitions once there is further clarity on the subject.

Source: Myiris.com, New Delhi, September 6, 2006
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