Petronas will not be affected with Moody’s downgrade: Dr M

by MARK RAO / pic by BERNAMA

Prime Minister Tun Dr Mahathir Mohamad (picture) said that Moody’s Investors Service Inc recent downgrade of Petroliam Nasional Bhd’s credit rating may be inaccurate but believed change would not impact the state-owned energy company.

“That is Moody’s assessment, but they are not necessarily right. Sometimes some agencies make inaccurate assessments, but we can’t criticise them because they are free to do so,” he told reporters after officiating the 20th Asia Oil and Gas Conference in Kuala Lumpur today.

“From what we see, I am confident the downgrade won’t affect Petronas,”  he said.

Moody’s downgraded Petronas’ domestic issuer and foreign currency senior unsecured ratings from A1 to A2 on Friday after updating its cross-sector methodology on sovereign credit quality.

The rating agency cited the linkages between the national energy company and its sole shareholder, the government were the reason behind the downgrade.

Its senior VP Vikas Halan said Moody’s cannot support a rating for Petronas that is two notches higher than that of the Malaysian sovereign despite the company’s credit metrics remaining strong.

Moody’s also downgraded Petronas’ baseline credit assessment from a1 to a2; the senior unsecured notes issued by Petronas Capital Ltd from A1 to A2 as well as its US$15 billion medium-term note program from (P)A1 to (P)A2; and Petronas Global Sukuk Ltd’s senior unsecured sukuk from A1 to A2.

But the ratings outlook for Petronas was upgraded from negative to stable.

Meanwhile Dr Mahathir said more casualties are expected if the US-China trade war persists while “games of provocation” in the Middle East is adding pressure to the oil and gas (O&G) sector.

“The O&G industry is indeed a cyclical business. History has shown that the ability to respond quickly with systematic and coherent strategies is necessary for longevity,” he said during his keynote address.

Petronas last Friday said its strong fundamentals remain unchanged despite Moody’s action to downgrade its ratings.

“Petronas has consistently maintained a conservative financial policy and healthy net cash balance that enables the company to withstand volatility and shocks in the market,” the energy company said in a statement.

On plans to reduce carbon emissions in the country, Dr Mahathir said Petronas is drafting an Oil, Gas, Energy and Environment White Paper to help Malaysia to be a low-carbon economy and fulfill its Paris Agreement pledge.

The Paris Agreement is a multinational agreement to combat climate change and stem the rise in global temperature substantially below two degrees Celsius.

Meanwhile, Economic Affairs Minister Datuk Seri Mohamed Azmin Ali said Malaysia’s goal is to increase the renewable energy generation to 20% of total installed capacity by 2025.

“To achieve this target, new renewable energy sources will be explored in addition to the current contribution from biogas, biomass, mini hydro and solar power,” he said at the conference.