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MOSCOW (MRC) -- Research and rating
agency Moody’s has recently downgraded Nayara Energy Limited’s
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,”
Moody’s 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, Moody’s 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). |
