ICRA assigns an issuer rating of IrAA to Petronet LNG

ICRA has assigned an issuer rating of `IrAA`, indicating high credit quality, to Petronet LNG Ltd. The rated entity carries low credit risk.

The rating is only an opinion on the general creditworthiness of the rated entity and not specific to any particular debt instrument. The rating reflects the strength arising from strong and financially sound project participants, including sponsors, the robustness of the contractual structure which effectively addresses most of the risks in the project, and PLL`s demonstrated track record , though limited, in running the regassification facility and generating profits.

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

The rating is constrained by the project implementation risks inherent in the company`s significant capex programme and the supply risks emanating from the fact that the 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 with 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.

Further, gas-to-gas competition could also emerge going forward. The rating assigned does not factor in capex associated with any acquisitions that PLL may resort to in future.

Source: Myiris.com, New Delhi, September 7, 2006
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