Formosa Plastics Corp

Formosa Plastics Corp.

Primary Credit Analyst: Ronald Cheng, Hong Kong + 852 2532 8015; [email protected]

Secondary Contact: David L Hsu, Taipei + 88688609334488; [email protected]

Table Of Contents

Credit Highlights

Outlook

Our Base-Case Scenario

Company Description

Peer comparison

Business Risk

Financial Risk

Liquidity

Environmental, Social, And Governance

Group Influence

Issue Ratings - Subordination Risk Analysis

Ratings Score Snapshot

Related Criteria

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT NOVEMBER 26, 2020 1 Formosa Plastics Corp.

Business Risk: SATISFACTORY Issuer Credit Rating Vulnerable Excellent bbb+ bbb+ bbb

BBB+/Stable/-- Financial Risk: INTERMEDIATE

Highly leveraged Minimal

Anchor Modifiers Group/Gov't

Taiwan National Scale twAA-/Stable/twA-1+

Credit Highlights

Key strengths Key risks Good market position for various petrochemical products Extended oversupply and weak demand constrains recovery in profitability throughout the Greater China region. and cash flow generation in 2021-2022. Good operating efficiency and product diversity underpinned by a High capital expenditure (capex) in U.S. and China prevents deleveraging high degree of vertical integration. over the next three to five years. Good financial flexibility with sizable liquid non-core assets. The group's performance remains sensitive to oil price volatility and uncertain market recovery from oversupply. Adequate liquidity but with sound banking relationships. Asset concentration risk from its largest single-site complex in Mai-Liao, Taiwan.

Deteriorating oversupply conditions could constrain the pace of recovery in the group's performance. We forecast the group's sales to recover by 20%-25% in 2021, supported by an expected rebound in oil price, as well as the group's capacity addition in the U.S. and China. However, we expect still-tepid demand and capacity additions in the region to limit the expansion of product spreads. We therefore project the Formosa Plastics (FP) group's EBITDA margin to only moderately widen to 12%-14% in 2021. This is despite better capacity utilization and efforts to increase sales of value-added products. The four core members of the FP group are Formosa Plastics Corp. (FPC), Nan Ya Plastics Corp. (NYPC), Formosa Chemicals & Fibre Corp. (FCFC), and Formosa Petrochemical Corp. (FPCC).

Expansion of chemical capacity in the U.S. and Asia (mainly China) from 2018-2022 could prevent significant improvement in supply-demand conditions, if current expansion projects are not materially delayed by COVID-19. Average selling prices and spreads for chemicals may be weakened and that is likely to derail the recovery. We believe products such as ethylene, propylene, paraxylene, and their downstream derivatives could be particularly at risk under the weak global demand.

Challenging macroeconomic conditions will limit recovery in the group's credit metrics in 2021-2022. Weak operating cash flow and significant capex in China and the U.S. limit the recovery in the FP group's credit metrics in 2021-2022, despite likely lower cash dividend payments and the group's efforts to manage its debt growth, including a reduction in

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT NOVEMBER 26, 2020 2 Formosa Plastics Corp. its guarantee to Vietnam-based Formosa Ho Tinh Steel's debts and financial support to other group member companies. We expect the group's ratio of debt to EBITDA to only recover to 2x-3x in 2021-2022 as the coronavirus outbreak moderates gradually, from the trough of about 4x in 2020.

Outlook: Stable

The stable outlook reflects our view that the FP group will maintain its ratio of debt to EBITDA at 2x-3x over the next two years with recovering profitability and delayed spending. This is despite a weaker ratio in 2020, due to the pandemic's impact and a sharp decline in oil prices. We also expect the group's generally satisfactory profitability and cash flow to support its shale gas-based chemical complex in the U.S. and other expansions without further deterioration in its debt leverage over the next three to five years.

Downside scenario

We may lower the long-term ratings on the core group members if the FP group's ratio of debt to EBITDA stays constantly above 3x. Scenarios that could lead to this include: (1) prolonged weak market conditions due to either a much weaker regional economy hurting demand, or capacity additions, particularly in China, that leads to sustained oversupply; or (2) the group taking on more aggressive cash dividend payouts, capex, or other investments that are substantially above our base case.

Upside scenario

We may raise the ratings on the core group members if the FP group can keep its debt-to-EBITDA ratio below 1.5x constantly. This could be achieved by more conservative dividend and investment policies that substantially and sustainably lower the group's debt. The debt-to-EBITDA ratio could also be kept below 1.5x through material improvement in the group's geographic diversity and product differentiation which strengthens the group's profitability and operating stability. The group could most likely achieve this when its U.S. investment results in a major contribution to consolidated revenue and profit.

Our Base-Case Scenario

Assumptions • We project Taiwan's GDP growth of 1.0% in 2020 and 3.0% in 2021. Our forecasts for China's GDP growth are for 2.1% in 2020 and 6.9% in 2021 while Asia Pacific GDP to contract 2.0% in 2020 and expand 6.9% in 2021. China continues to be a relative bright spot while many other emerging markets struggle to contain COVID-19. The economic fallout from the pandemic has bottomed but the rebound appears unequal among countries and sectors.

• Our base-case assumptions for Brent crude oil are US$40 per barrel (/bbl) for the remaining of 2020, and US$50/bbl for 2021.

• Oil markets faced a severe supply-demand imbalance in the second quarter of 2020. In line with our economic outlook, we anticipate a recovery in GDP and oil demand throughout the second half of 2020 and into 2021 as the shocks from the coronavirus outbreak moderate. However, FPCC could continue to suffer if the oil price stays low and demand for refined products remains sluggish.

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• We expect chemical demand to recover in the second half of 2020, but the risks to margins remain high, especially for commodity chemicals, due to significant capacity additions. However, downstream manufacturers such as FPC and NYPC could have better spreads for product lines with lower input costs when market demand recovers.

• The revenue of the four core companies could decline by 25%-30% in 2020 but recover by 20%-25% in 2021.

• We expect the group's EBITDA margin to be 10%-11% in 2020, due to lower utilization and weak product prices, but could recover to 12%-14% in 2021.

• Capex plus investments will be high at about New Taiwan dollar (NT$) 110 billion in 2020, partly due to delayed capex from 2019. We assume this amount to fall to NT$80 billion-NT$90 billion in 2021, before increasing again to above NT$100 billion in 2022, reflecting the potential delay on the group's Louisiana project.

• The group's guarantee on its Vietnam steel mill project will decrease gradually from about NT$120 billion at the end of 2019 to about NT$80 billion in 2021, mainly through refinancing without the provision of a guarantee.

• Cash dividend payout ratio will remain at about 72% of the previous year's net income over the next few years. For 2021, we assume a higher payout ratio to reflect the potential weak earnings in 2020.

• The average tax rate in 2020 and 2021 will remain similar to that in 2019.

• Cash conversion cycle could lengthen in 2020 before returning to normal in 2021. We expect some working capital inflow this year due to the expected lower sales.

• Interest rates will remain stable in 2020 and 2021.

Key Metrics Formosa Plastics Group -- Key Metrics

(NT$ bil.) 2018 2019 2020f 2021f 2022f Revenue 1,371.90 1,187.40 800-850 950-1,050 1,050-1,150 EBITDA Margin (%) 16.5 12.5 10.5-11.0 13-14 14-15 Adjusted debt 369 322.7 350-370 330-350 370-390 Debt/EBITDA (X) 1.6 2.2 3.8-4.2 2.3-2.7 2.2-2.6

f--S&P Global Ratings Corp. forecast.

The FP group's operating performance should bottom out in 2020 and recover gradually in 2021-2022. Low oil and chemical product prices and the low utilization rate of FP group's refining capacity through the end of 2020 will lower the group's revenue 25%-30% in 2020. However, we forecast the group's sales to recover by 20%-25% in 2021, supported by a rebound in oil prices and the group's capacity addition in Texas, USA and Ningbo, China. This is in addition to the uncertain demand recovery due to COVID-19.

We expect FPCC's refining utilization rate to stay slightly below 70% in 2020. Lower demand for refining products and the company's shutdown of a refining unit after a fire will keep the utilization rate low in 2020 before it recovers to 85%-90% in 2021.

Lower utilization will also materially hurt the FP group's EBITDA margin, as well as amid thin product spreads, and a sustained fall in oil prices.

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We expect the group's EBITDA margin to decline to 10%-11% in 2020 from 12.5% in 2019. FP group's U.S. capacity expansion could keep free cash flow negative and prevent an improvement in cash flow and leverage for an extended period after 2022. We expect the group's capex to increase from 2022 onward, which is a delay of several quarters from our previous expectation due to the impact of COVID-19. The group plans to build a shale gas-based chemical complex in the U.S. state of Louisiana at a cost of over US$12 billion in two phases. This investment is to support the group's significant expansion plans and is likely to improve its geographic diversity and cost structure. However, this project along with other expansions in Asia could lead to weak free cash flow and keep the group's leverage relatively elevated for an extended period after 2022, if profitability does not grow materially.

Chart 1

Company Description

FP group is Taiwan's largest private-sector industrial conglomerate in terms of assets. We assess four companies as holding core status within the group--Formosa Plastics Corp. (FPC), Nan Ya Plastics Corp. (NYPC), Formosa Chemicals & Fibre Corp. (FCFC), and Formosa Petrochemical Corp. (FPCC)--whose operations are vertically integrated and range from oil refining and naphtha cracking to plastics and polyesters (see table 1 and chart 2). The group's highly integrated Mai-Liao complex provides group members with a stable supply of base chemical feedstock.

Table 1

Company Main products Formosa Plastics Vinyl chloride, polyvinylchloride (PVC), caustic soda, polyethylene (PE), polypropylene (PP), ethylene vinyl acetate Corp. (EVA), acrylic fiber, acrylic esters, acrylonitrile (AN), methyl methacrylate (MMA), epichlorohydrin (ECH), methyl tert-butyl ether (MTBE), carbon fiber, super absorbent polymer (SAP). Nan Ya Plastics Corp. Secondary plastics, polyesters, printed circuit board/electronic materials, ethylene glycol (EG), 1,4-butanediol (1,4BG) and other alcohols, curing agents, anti-oxidants and modifiers, Bisphenol A (BPA), Phthalic Anhydride (PA), Plasticizer, epoxidized soybean oil (ESO), 2-Ethylhexanol (2EH), Hydrogen Peroxide, engineering.

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Table 1

Company Main products Formosa Chemicals & Aromatics and derivatives- benzene, ortho-xylene (OX), para-xylene (PX); phenol, acetone, styrene monomer (SM), Fibre Corp. purified terephthalic acid (PTA), polymers- acrylonitrile-butadiene-styrene (ABS) resins, polystyrene (PS), polypropylene (PP), and polycarbonate (PC); textile & fiber, electricity generation. Formosa Oil refining, olefin, electricity generation. Petrochemical Corp.

Chart 2

Peer comparison

Table 1 Formosa Plastics Group -- Peer Comparison

Formosa Plastics PTT Global Chemical (Mil. USD) Corp. Reliance Industries Ltd. Public Co. Ltd. LG Chem Ltd. Ratings as of Nov. 9, 2020 BBB+/Stable BBB+/Stable/-- BBB+/Negative/-- BBB+/Stable/-- --Fiscal year ended Dec. --Fiscal year ended March --Fiscal year ended Dec. 31, --Fiscal year ended Dec. 31, 2019-- 31, 2020-- 2019-- 31, 2019--

Financials (Adjusted) Revenue 39,692.40 81,226.50 13,870.80 24,789.30

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Table 1 Formosa Plastics Group -- Peer Comparison (cont.)

Formosa Plastics PTT Global Chemical (Mil. USD) Corp. Reliance Industries Ltd. Public Co. Ltd. LG Chem Ltd. EBITDA 4,959.90 11,753.40 973.9 2,266.00 Funds from operations 3,770.20 6,853.80 817.5 1,561.80 (FFO) Interest expense 211.4 3,756.40 140 210.1 Cash interest paid 180.5 3,785.90 104.2 204.7 Cash flow from operations 5,722.70 9,446.20 1,031.30 2,548.10 Capital expenditure 2,360.30 10,161.50 1,338.30 5,466.00 Free operating cash flow 3,362.40 -715.3 -307 -2,917.90 (FOCF) Discretionary cash flow -954.1 -1,325.10 -895.8 -3,337.00 (DCF) Cash and short-term 7,120.40 13,760.10 858.8 1,663.70 investments Debt 10,786.60 36,245.20 3,250.30 6,143.10 Equity 32,405.80 61,266.90 9,865.10 15,054.40

Ratios EBITDA margin (%) 12.5 14.5 7 9.1 Return on capital (%) 9.6 11.2 3.8 3.8 EBITDA interest coverage 23.5 3.1 7 10.8 (x) FFO cash interest 21.9 2.8 8.8 8.6 coverage (x) Debt/EBITDA (x) 2.2 3.1 3.3 2.7 FFO/debt (%) 35 18.9 25.2 25.4 Cash flow from 53.1 26.1 31.7 41.5 operations/debt (%) FOCF/debt (%) 31.2 -2 -9.4 -47.5 DCF/debt (%) -8.8 -3.7 -27.6 -54.3

We have chosen several oil and chemical peers in the region, including Reliance Industries Ltd., PTT Global Chemical Public Co. Ltd., and LG Chem Ltd.

FP group is one of the largest petrochemical manufacturing groups in the region with strong engineering and technology capability, good scale economy, high degree of vertical integration, and very high complexity. The group is a leading global company in terms of capacity in several commodity chemical products, with a good and stable position in the domestic oil market. We consider FP group's competitive advantage is slightly weaker than that for Reliance but ahead of LG Chem and PTT.

Reliance has a solid position in the regional refining sector also with high complexity, as well as integrated and large petrochemical operations. Reliance also has large ethylene and polyester capacity and is among the top 10 chemical producers globally, but its business is moderately concentrated in the domestic market. LG Chem has relatively specialized business in chemicals and electronics materials, mainly in lithium batteries, but its diversity in chemical

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT NOVEMBER 26, 2020 7 Formosa Plastics Corp. business is weaker than for the FP group. PTT is the refining and chemical arm of its larger group in Thailand. The company's operations are smaller and less diversified than those for the FP group and Reliance.

Financial risk profiles are more company-specific, though these large chemical groups face the same cyclical chemical cycles. Reliance has weaker financial ratios than its peers' due to its somewhat aggressive expansion over the past few years. FP group also has a constant capacity expansion plan and is likely to lead its financial ratios under pressure when the market undergoes a downturn.

Business Risk: Satisfactory

The FP group's business risk profile reflects our view that the group's strong market position in Taiwan's commodity chemical market, good product diversity and scale economy, and highly vertically integrated operations will continue to support the group's satisfactory competitive position and cash flow generation.

However, FPCC's high sensitivity to oil price movements and the volatile refining margins because of the products' commodity nature will continue to weigh on the group's profitability over the next few years. In addition, aggressive capacity expansion, particularly in China, combined with COVID-19-induced uncertainty over global demand for refined products such as aviation fuel and gasoline, will affect the company's profitability. In our estimate, FPCC's operating income contribution to the consolidated group ranged from negative 4% to positive 59% over the past eight years. Accordingly, we expect the FP group to experience slightly higher business volatility over the next few years.

FP group's asset concentration risk will remain over the next few years, given the group's single site Mai-Liao complex generates more than 70% of the group's revenue. Any significant disruption to the operations at the site would greatly affect the group's operating performance and cash flow, as evidenced by a major fire accident in one of FPCC's refining unit in July 2020. However, we believe the significant investments in safety enhancements and higher capex on maintenance needs should help to improve the complex's performance over the next two years. In addition, the Louisiana project could help the group to lower its asset concentration risk over the longer term.

Financial Risk: Intermediate

FP group is likely to generate consistent cash outflow and grow its debt level over the next two to three years, due to likely weaker profitability and cash flow generation, as well as larger capex. However, we also expect the group to take measures during the period of high capex to curb the rise in its debt leverage. This could include reductions in lending to other group member companies, and a gradual reduction in loan guarantees on the Vietnam steel mill by the four core companies.

We also believe the group's financial flexibility will strengthen its credit profile because of the group's high holdings in other FP group member companies including Formosa Plastics Corp. U.S.A. (FPC USA) and Nanya Technology Corp., which can be liquidated in a reasonable time frame. As the end of 2019, the four core companies had about NT$390 billion in long-term investments.

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Financial summary Table 2 Formosa Plastics Corp. -- Financial Summary --Year ended Dec. 31-- (Mil. NT$) 2019 2018 2017 2016 2015 Revenue 1,187,399 1,371,874 1,186,864 1,058,828 1,139,093 EBITDA 148,377 225,690 250,337 227,635 173,458 Funds from operations (FFO) 112,784 181,819 212,088 199,788 159,600 Interest expense 6,325 6,723 6,886 7,076 8,595 Cash interest paid 5,400 6,895 7,009 8,446 9,506 Cash flow from operations 171,195 201,823 198,066 181,503 271,921 Capital expenditure 70,608 67,486 36,761 26,906 38,704 Free operating cash flow (FOCF) 100,587 134,338 161,304 154,596 233,218 Discretionary cash flow (DCF) (28,542) (2,606) 45,312 74,954 197,410 Cash and short-term investments 213,006 215,904 260,530 265,450 227,726 Gross available cash 213,006 215,904 260,530 265,450 227,726 Debt 322,681 369,059 320,399 440,891 486,572 Equity 969,420 1,020,935 994,899 900,944 839,961

Adjusted ratios EBITDA margin (%) 12.5 16.5 21.1 21.5 15.2 Return on capital (%) 9.6 16.1 17.0 14.4 10.3 EBITDA interest coverage (x) 23.5 33.6 36.4 32.2 20.2 FFO cash interest coverage (x) 21.9 27.4 31.3 24.7 17.8 Debt/EBITDA (x) 2.2 1.6 1.3 1.9 2.8 FFO/debt (%) 35.0 49.3 66.2 45.3 32.8 Cash flow from operations/debt (%) 53.1 54.7 61.8 41.2 55.9 FOCF/debt (%) 31.2 36.4 50.3 35.1 47.9 DCF/debt (%) (8.8) (0.7) 14.1 17.0 40.6

NT$--New Taiwan dollar. Note: Data shown are taken from the company's financial statements but might include adjustments made by S&P Global Ratings' analysts. Reconciliation Table 3 Reconciliation Of Formosa Plastics Group Reported Amounts With S&P Global Ratings' Adjusted Amounts --Year ended Dec. 31. 2019--

Operating Interest Adjusted Cash flow from (Mil. NT$) Debt EBITDA income expense EBITDA operations Capex Formosa Plastics Corp. 359,322.7 139,473.0 83,357.3 5,405.8 148,376.5 167,116.1 71,438.4 reported amounts

S&P Global Ratings' adjustments Cash taxes paid ------(30,192.0) -- -- Cash taxes paid: Other ------(4,569.7) -- -- Cash interest paid 8,614.9 ------Operating leases -- 88.3 88.3 88.3 ------

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Table 3 Reconciliation Of Formosa Plastics Group Reported Amounts With S&P Global Ratings' Adjusted Amounts (cont.) Accessible cash and (180,416.1) ------liquid investments Capitalized interest ------830.5 (830.5) (830.5) (830.5) Dividends received from -- 8,815.2 ------equity investments Nonoperating income -- -- 45,100.0 ------(expense) Debt: Guarantees 135,159.6 ------Operating cash flow: ------4,909.6 -- Other Total adjustments (36,641.6) 8,903.5 45,188.3 918.8 (35,592.2) 4,079.1 (830.5)

Interest Funds from Cash flow from Debt EBITDA EBIT expense operations operations Capex S&P Global Ratings' 322,681.1 148,376.5 128,545.6 6,324.6 112,784.3 171,195.2 70,607.9 adjusted amounts

NT$--New Taiwan dollar. Note: Data shown are taken from the company's financial statements but might include adjustments made by S&P Global Ratings' analysts.

Liquidity: Adequate

We assess the FP group to have adequate liquidity. We expect its ratio of liquidity sources to uses at 1.5x for the next 12 months. Moreover, we believe the group's net liquidity sources will stay positive, even if its forecast EBITDA declined by 15%. In our view, the group has solid banking relationships and a generally high credit standing to support its financial flexibility, as evident from its very low credit spread and large amount of undrawn credit lines. In addition, we expect FP group to comply easily with the financial covenants on the group's current ratio, ratio of liability to equity, interest coverage, and net worth for a small portion of its bank borrowings.

Principal Liquidity Sources Principal Liquidity Uses

• Cash and short-term investments of NT$224.5 • Debt maturity of NT$170 billion in the 12 months billion as of the end of June 2020. ending June 2021. • Funds from operations of about NT$100 billion in • Maintenance capex of NT$30 billion in the 12 the 12 months ending June 2021. months ending June 2021. • Undrawn long-term credit facilities of NT$90 billion • Cash dividend payout of about 72% of the previous as of the end of June 2020. year's net income.

Debt maturities Table 4 Formosa Plastics Corp. Group - Debt Maturities

Debt Due In (NT$ mil.) 2019/7-2020/6 117,057.1

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Table 4 Formosa Plastics Corp. Group - Debt Maturities (cont.)

Debt Due In (NT$ mil.) 2020/7-2021/6 31,562.9 2021/7-2022/6 21,250.0 2022/7-2023/6 27,925.0 2023/7-2024/6 20,525.0 after 2024/7 55,550.0

NT$--New Taiwan dollar.

Environmental, Social, And Governance

Government policy and public opinion have become more challenging factors for chemical companies in China and Taiwan over the past several years. Social factors, often combined with environmental factors, are critical in our rating analysis for the four core companies in the FP group.

Heightened regulatory risk and rising environmental protection pressures have affected the group's credit protection measures in the past. In 2011, two major fires at the group's Mai-Liao complex, and subsequent inspections and remediation, caused a partial shutdown of the complex for safety inspection and enhancements. FP group still faces persistent pressure from local communities and governments that require higher than regulatory standards for air, water, and land pollution management, which we believe will require continued capital spending.

Governance factors, however, are neutral to the ratings, because the group has satisfactory corporate management and governance supported by its experienced management team. The company also maintains stable relationships with various regulatory authorities with no major internal control, legal, or transparency deficiencies.

Group Influence

The ratings on FPC, NYP, FCFC and FPCC reflect their status as the core companies of the FP group. We believe the core members will support each other operationally and financially due to the impartibility of their business operations with highly integrated operations and centralized strategic planning and financial management, in addition to their common controlling shareholders. Accordingly, when analyzing the credit quality of the four core members, we view the individual operating units as a combined manufacturing entity. We consolidate the four operating units' financial statements to assess the group credit profile; accordingly, we have equalized the long-term issuer credit ratings on all of these operating units to the group credit profile of 'bbb+'.

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Issue Ratings - Subordination Risk Analysis

Capital structure FPC's capital structure comprises NT$3.4 billion secured debt, NT$102.5 billion unsecured debt at the parent level, and NT$8.7 billion unsecured debt issued by the company's subsidiaries as of the end of 2019. The unsecured debt at the parent level includes guaranteed debt to other related entities.

NY.'s capital structure comprises NT$4 billion secured debt, NT$154.2 billion unsecured debt at the parent level, and NT$15.4 billion unsecured debt issued by the company's subsidiaries as of the end of 2019. The unsecured debt at the parent level includes guaranteed debt to other related entities.

FCFC's capital structure comprises NT$4.2 billion secured debt, NT$134 billion unsecured debt at the parent level, and NT$29.4 billion unsecured debt issued by the company's subsidiaries as of the end of 2019. The unsecured debt at the parent level includes guaranteed debt to other related entities.

FPCC's capital structure comprises no secured debt, and NT$51 billion unsecured debt as of the end of 2019. The unsecured debt at the parent level includes guaranteed debt to other related entities.

Analytical conclusions Our senior unsecured issue-level ratings on the companies' bonds are equated with our issuer credit ratings on the four core companies. The four core companies' debts are rated the same as the corporate credit rating, as no significant elements of subordination risk are present in the capital structure.

Ratings Score Snapshot

Issuer Credit Rating BBB+/Stable/--

Business risk: Satisfactory • Country risk: Intermediate • Industry risk: Moderately high • Competitive position: Satisfactory

Financial risk: Intermediate • Cash flow/leverage: Intermediate

Anchor: bbb

Modifiers • Diversification/portfolio effect: Neutral (no impact) • Capital structure: Positive (+1 notch) • Financial policy: Neutral (no impact)

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• Liquidity: Adequate (no impact) • Management and governance: Satisfactory (no impact) • Comparable rating analysis: Neutral (no impact)

Stand-alone credit profile • Group credit profile: bbb+ • Entity status within group: Core

Related Criteria

• General Criteria: Group Rating Methodology, July 1, 2019

• Criteria | Corporates | General: Corporate Methodology: Ratios And Adjustments, April 1, 2019

• Criteria | Corporates | General: Reflecting Subordination Risk In Corporate Issue Ratings, March 28, 2018

• General Criteria: Guarantee Criteria, Oct. 21, 2016

• Criteria | Corporates | General: Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, Dec. 16, 2014

• Criteria | Corporates | Industrials: Key Credit Factors For The Oil Refining And Marketing Industry, March 27, 2014

• General Criteria: Country Risk Assessment Methodology And Assumptions, Nov. 19, 2013

• Criteria | Corporates | General: Corporate Methodology, Nov. 19, 2013

• General Criteria: Methodology: Industry Risk, Nov. 19, 2013

• General Criteria: Methodology: Management And Governance Credit Factors For Corporate Entities, Nov. 13, 2012

• General Criteria: Principles Of Credit Ratings, Feb. 16, 2011

Business And Financial Risk Matrix

Financial Risk Profile Business Risk Profile Minimal Modest Intermediate Significant Aggressive Highly leveraged Excellent aaa/aa+ aa a+/a a- bbb bbb-/bb+ Strong aa/aa- a+/a a-/bbb+ bbb bb+ bb

Satisfactory a/a- bbb+ bbb/bbb- bbb-/bb+ bb b+ Fair bbb/bbb- bbb- bb+ bb bb- b Weak bb+ bb+ bb bb- b+ b/b- Vulnerable bb- bb- bb-/b+ b+ b b-

Ratings Detail (As Of November 26, 2020)* Formosa Plastics Corp. Issuer Credit Rating BBB+/Stable/-- Taiwan National Scale twAA-/Stable/twA-1+

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Ratings Detail (As Of November 26, 2020)*(cont.) Senior Unsecured Taiwan National Scale twAA- Issuer Credit Ratings History 16-Oct-2020 BBB+/Stable/-- 22-Oct-2019 A-/Negative/-- 15-Oct-2018 A-/Stable/-- 18-Oct-2017 BBB+/Positive/-- 16-Oct-2020 Taiwan National Scale twAA-/Stable/twA-1+ 22-Oct-2019 twAA/Negative/twA-1+ 15-Oct-2018 twAA/Stable/twA-1+ 18-Oct-2017 twAA-/Positive/twA-1+ Related Entities Formosa Chemicals & Fibre Corp. Issuer Credit Rating BBB+/Stable/-- Taiwan National Scale twAA-/Stable/twA-1+ Senior Unsecured Taiwan National Scale twAA- Formosa Petrochemical Corp. Issuer Credit Rating BBB+/Stable/-- Taiwan National Scale twAA-/Stable/twA-1+ Senior Unsecured Taiwan National Scale twAA- Nan Ya Plastics Corp. Issuer Credit Rating BBB+/Stable/-- Taiwan National Scale twAA-/Stable/twA-1+ Senior Unsecured Taiwan National Scale twAA- *Unless otherwise noted, all ratings in this report are global scale ratings. S&P Global Ratings’ credit ratings on the global scale are comparable across countries. S&P Global Ratings’ credit ratings on a national scale are relative to obligors or obligations within that specific country. Issue and debt ratings could include debt guaranteed by another entity, and rated debt that an entity guarantees.

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