SK Energy's ratings unaffected by reorganisation plan - Fitch

01 October 2010 11:09  [Source: ICIS news]

SINGAPORE (ICIS)--SK Energy’s decision to reorganise its petrochemical and refining and marketing divisions into independent entities will not affect the firm’s ratings as the entities are still fully under the company’s control, Fitch Ratings said on Friday.

“However, should SK [Energy] decide to divest minority ownership of these entities in the future, Fitch will need to assess whether the presence of outside shareholders would significantly weaken the parent company's access to these businesses' cash flows,” said Wan Hee Yoo, associate director at Fitch Ratings’ Asia-Pacific energy and utilities team.

SK Energy on 1 October announced its plans to reorganise the petrochemical and refining and marketing divisions by 1 January 2011, according to the company’s filing to the Korea Exchange.

The reorganisation plan has been approved by the board and subject to approval at a shareholders’ meeting on 26 November, SK Energy said in the filing.

The firm plans to retain 100% ownership of both entities, it said. The filing did not disclose the reasons for the firm’s reorganisation plans.

SK Energy’s petrochemicals business accounted for 27% of the company’s unconsolidated revenue in 2009 and 50% of its earnings before interest, tax, depreciation and amortisation (EBITDA), according to Fitch Ratings.

“Operating results from this division were very strong due to higher demand,” said the ratings agency.

However, the strong results seen in 2009 may not be sustainable in the “short-to-medium” term, as regional capacity additions could add pressure on SK Energy’s petrochemical spreads, it added.

Fitch Ratings currently rates SK Energy’s long-term foreign currency issuer default rating (IDR) and long-term foreign currency senior unsecured rating at “BBB”, with a short-term IDR of “F3”. The outlook on the IDR is negative.

SK Energy could not be immediately reached for comment.

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By: Nurluqman Suratman

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