The National Gas Company of Trinidad and Tobago (NGC) has been downgraded by Caribbean Information and Credit Rating Services Limited (CariCRIS).
CariCris lowered the ratings on the NGC’s USD 400 million debt issue to CariAA (Foreign and Local Currency) on the regional rating scale, and ttAA on the Trinidad and Tobago (T&T) national rating scale from CariAA+ (Foreign and Local Currency) on the regional rating scale and ttAA+ (Local Currency Rating) on the national rating scale. According to CariCris the downgrade is driven by the higher cost of gas from upstream suppliers and historically low international commodity prices, which have resulted in compressed profitability margins, adversely impacted financial performance, and constrained debt service metrics.
The downgrade comes as last year the NGC recorded its first loss in its history and its accounts have shown that the company has been burning cash.
Its Chairman Conrad Enill told Guardian Media that the State Enterprise is trying its best in the face of difficult international conditions for commodities.
The NGC’s major business is the purchase of natural gas from upstream companies and then selling it for a profit to the petrochemical producers. However with the collapse of methanol and ammonia prices and the high acquisition costs of natural gas from local producers it has left the NGC and the petrochemical companies in difficulties.
On Thursday Methanex Corporation announced that it was shutting indefinitely its Titan methanol plant in T&T saying it has not been able to reach an agreement with the NGC.
CariCris also assigned a negative outlook on the lowered ratings. The negative outlook it said is predicated on the uncertainties in the global economic environment together with the changing business model that is characterised by rising natural gas supply costs and substantially reduced international energy commodity prices, which are likely to have adverse impacts on NGC’s financial performance and debt protection metrics going forward.
“NGC’s creditworthiness continues to reflect the Company’s strategic importance to the domestic energy sector and the Government of the Republic of Trinidad and Tobago (GoRTT) as well as the stabilisation in gas supply with continued exploration and development activity.” the release read.
CariCris noted that despite the downgrade the NGC’s low gearing and good debt protection metrics, though reduced from prior years supports the ratings.
“These rating strengths are tempered by the Company’s significantly reduced earnings and profitability due to falling commodity prices and its high vulnerability to a changing energy landscape, characterised by compressed margins on account of falling energy prices and higher upstream prices.” CariCris noted.