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Moodys downgrades Nayara Energy rating to negative

February 27/2020

MOSCOW (MRC) -- Research and rating agency Moodys has recently downgraded Nayara Energy Limiteds corporate family rating to negative from stable, driven largely by weak refining margin environment in Asia, according to Energyworld.

"The downgrade to Ba3 reflects the significant deterioration in Nayara's credit metrics, driven largely by the weak refining margin environment in Asia," Sweta Patodia, Moody's lead analyst for Nayara, said in a statement.

Nayara's operating performance was further affected by a planned maintenance shutdown in December 2018, which resulted in lower throughput and capacity utilization during the period. In addition, the implementation of new accounting standards with respect to operating leases resulted in higher leverage and further weakened the company's credit metrics.

Nayara's leverage - as measured by debt/EBITDA - increased to approximately 6.3x for last twelve months ended 30 June 2019 from 3.9x for fiscal year ended March 2018, and interest cover - as measured by EBIT/interest - declined to 1.5x from 2.1x over the same period, Moodys said in a statement.

Tightening regulations on the use of heavy fuel oil in the shipping industry from January 2020 will result in an increase in demand for middle distillates and lead to some recovery in refining margins for the refinery, the agency projected.

The rating agency expects Nayara to benefit from the new regulations given its high proportion of light and middle distillate output. However, the impact of recent outbreak of coronavirus on regional demand growth of petroleum product remains uncertain.

"While we expect Nayara's credit metrics to improve over the next 12-18 months, they will continue to remain weakly positioned," Patodia said. The negative outlook reflects that the regional refining margin environment continues to remain uncertain and could delay improvement in Nayara's credit metrics from current levels, Moodys said.

Given the negative outlook, an upgrade is unlikely over the next 12-18 months. The outlook could return to stable if there is an improvement in the operating environment which leads to an improvement in the company's profitability, the agency said.

Nayara Energy Ltd is a refiner and supplier of petroleum products in India and overseas. It operates the country's second largest single-site refinery in Gujarat, with a nameplate capacity of 405 thousand barrels per day and a high complexity index of 11.8.

As MRC reported previously, Thyssenkrupp Industrial Solutions (India) has recently signed a contract with Nayara Energy, under which it will provide project management consultancy (PMC) services for Nayara's new petrochemical project to be built at the site of Nayara's 20-million-t/y Vadinar refinery in India. The USD850-million project, which will mark Nayara's entry into the petrochemical sector, includes a 450,000-t/y propylene recovery unit, a 450,000-t/y Unipol polypropylene (PP) plant, a 200,000-t/y methyl tertiary butyl ether unit and associated off-sites and utility facilities. PCN earlier said the project was expected to be completed in 2022.

According to MRC's ScanPlast report, Russia's the estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).
Author:Margaret Volkova
Tags:PP, crude and gaz condensate, PP random copolymer, propylene, petrochemistry, India, Russia.
Category:General News
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