Financial Risk 1. Foreign Currency Exchange Risk Changes in the value of the Baht against the US dollar directly and indirectly affect IRPC’s revenue and expenditure as the company’s petroleum and petrochemical products are paid for in US dollar whereas the cost of procuring feedstocks, mainly crude oil, is settled in Baht while still being tied to USD linked world market prices as is the case of project loans. IRPC has adopted a risk management approach using natural hedge techniques to mitigate risks associated with such exchange rate fluctuations by structuring its foreign currency-denominated loans and debentures proportional to income in foreign currencies. This risk management activity comes under the oversight, approval and monitoring of the Risk Management Committee to ensure it conforms to risk management policy and remains within the company’s risk appetite. The company also engaged in FX swap to reduce its exchange rate risk exposure associated with USD export revenue and USD-denominated expenditure on feedstocks. 2. Funding and Liquidity Risk IRPC has devised a capital spending plan for ongoing business expansion and thus incurred a repayment burden for loans and maturing debentures. The company needs to secure adequate capital to meet the obligations at a suitable cost of funds. The ability to obtain external funding depends on factors, such as operating results, financial status, credit rating of the company, petroleum and petrochemical industry outlook as well as economic climate and money market conditions, domestic and international, etc. The company may be exposed to liquidity risk unless it continues to find external funding for adequate working capital. IRPC’s risk management approach is to raise sufficient capital to fund its business plan. Capital is structured to keep key financial ratios at an appropriate level, put in place good corporate governance as well as monitor factors affecting or related to financing options to secure funding at reasonable costs. At present, the company’s credit line from financial institutions consists of a short-term loan of THB 21.635 billion for use as working capital, and a credit line of THB 10 billion under a loan agreement with PTT with a loan ceiling of THB 1.5 billion to efficiently manage the liquidity within the PTT Group. Capital Projects Risk The company has invested in a landmark project, Ultra Clean Fuel (UCF), to improve refinery efficiency and upgrade diesel quality from Euro IV to Euro V standard compliance as required by the government in 2024, which adds value to the company’s diesel fuel products. As the company got ready for project management, guidelines have been developed to address project risks as follows: 1) Selected contractors with good track records in large construction projects as well as well-qualified project management advisers to ensure successful completion of the project 2) Developed marketing and sales plan to accommodate the increase in quantity of the products with suitable sales channels, marketability, and sufficient market demand 3) Provided needed resources, such as personnel, financing, construction site and utilitiy systems, to support and drive the project to successful completion with a high level of efficiency 4) Designed progress a tracking system and processes so that problems that arise can be solved promptly, with reporting function to keep relevant committees informed, ensuring successful project completion. Organizational Capability Risk IRPC has implemented the New Organization with Agile Human project: The NOAH initiative aims to enhance organizational capabilities by creating and developing new ways of working at the highest level of cost-efficiency and competitiveness. The initiative calls for new, improved organizational setup along with streamlined workforce 104 IRPC PUBLIC COMPANY LIMITED 56-1 ONE REPORT 2021
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