KUALA LUMPUR: Moody's Investors Service has affirmed Petronas LNG Ltd (PLL) with Baa1 ratings and stable outlook.
Moody's in a recent statement said PLL's Baa1 ratings were positioned two notches below the A2 ratings of its ultimate parent, Petroliam Nasional Bhd which is A2 stable," Moody's analyst Hui Ting Sim said.
"The top-down rating approach reflects PLL's full ownership by Petronas as well as its strong operational and financial integration with its parent," she said.
PLL is a 100 per cent-owned by Petronas, Malaysia's national oil company, which is in turn wholly owned by the government.
She said Petronas has a firm track record of providing financial support to PLL, as demonstrated by cash injections of US$870 million in PLL since 2015.
PLL enjoys ongoing liquidity support from Petronas and it can draw from Petronas' umbrella credit facility for liquidity management.
While Petronas' support for PLL extends beyond financial assistance, it also provides PLL with significant management support and oversight, including monthly reporting on risk and governance to a committee chaired by Petronas.
PLL also has an integrated treasury function with Petronas, whereby its cash is held centrally by Petronas and cash flow requirements are shared with its parent.
Given PLL's role of marketing and trading liquefied natural gas for the Petronas group of companies, PLL is exposed to carbon transition risk because of the global transition toward less carbon-intensive sources of energy.
As for governance factors, the rating incorporates PLL's 100 per cent ownership by Petronas and the fact that the company acts as the group's LNG marketing and trading arm.
As a private company, PLL does not publicly disclose its operational and financial performance.
However, Hui said this transparency risk is counterbalanced by strong oversight by Petronas over PLL as well as the company's debt-free position.
She said Moody's will consider an upgrade only if Petronas' rating is upgraded.
PLL's ratings will be downgraded if Petronas' rating is downgraded, reduces its ownership of PLL, reduces its supervision of operational and financial support to PLL, or PLL's risk appetite materially increases.
She said PLL's ratings were assigned using a top-down approach by evaluating the company's full ownership by Petronas, its strong operational and financial integration with Petronas, and the willingness and ability of Petronas to extend support to PLL in times of distress.