Emerging Market Mega Borrowers Forecast Snapshots for Mid to Low Investment-Grade Issuers Corporates / APAC and Latin America April 2019 Contacts

Global Head

Richard Hunter Global Group Head – Corporate Ratings +44 20 3530-1102

Regional Group Heads

Daniel R. Kastholm, CFA Buddhika Piyasena Head of Latin America Corporate Ratings Head of Asia Pacific Corporate Ratings +1 312 368-2070 +65 6796-7223

Deputy Regional Group Heads

Joe Bormann, CFA Steve Durose Deputy Head of Latin America Corporate Ratings Deputy Head of Asia-Pacific Corporate Ratings +1 312 368-3349 +61 2 8256-0307

Research Heads

Jay Djemal Matt Jamieson Head of Credit Research – Latin America Head of Credit Research – Asia Pacific +1 312 368-3134 +822 3278-8355

Analytical Contributors

Danny Patel Nikhil Chaturvedi Analyst Data Analyst +1 312 368-5461 +1 312 205-3396

Brian Lively Associate Analyst +1 312 368-3129

www.fitchratings.com | April 2019 2 This report, originally published on March 13, 2019, was amended to correct Codelco’s SCP rating on page 15.

Content

GREs Comprise Half of APAC and LatAm Emerging Market Mega Borrowers 4

Emerging Market Mega Borrowers in APAC and LatAm 5

Mega Borrowers America Movil S.A.B. de C.V. 7 Braskem S.A. 8 China Communications Construction Company Limited 9 China Minmetals Corporation 10 China National Chemical Corporation Limited 11 China Railway Group Limited 12 CK Hutchison Holdings Limited 13 Comision Federal de Electricidad (CFE) 14 Corporacion Nacional del Cobre de Chile (Codelco) 15 Country Garden Holdings Co. Ltd. 16 Ecopetrol S.A. 17 HBIS Group Co., Ltd. 18 Petroleo Brasileiro S.A. (Petrobras) 19 Petroleos Mexicanos (PEMEX) 20 Poly Developments and Holdings Group Co., Ltd. 21 Power Construction Corporation of China 22 PT Perusahaan Listrik Negara (Persero) 23 Reliance Industries Ltd 24 Shougang Group Co., Ltd. 25 Suzano Papel e Celulose S.A. 26 Vale S.A. 27

Analyst Contacts 28

www.fitchratings.com | April 2019 3 Corporate Finance

GREs Comprise Bulk of APAC and LatAm Emerging Market Mega Borrowers

Mid to low investment-grade issuers — defined as companies with Issuer Default Ratings (IDRs) spanning ‘A–’, ‘BBB+’, ‘BBB’ and ‘BBB–’ — compose 38% of Fitch Ratings’ portfolio Total Adjusted Debt/EBITDAR — in both emerging market regions of APAC and LatAm, respectively. This share of ratings ‘BBB’ Category Medians shows a slight increase for LatAm compared with a decade ago, when mid-investment- APAC LatAm grade ratings composed 36% of the portfolio, but indicates a small reduction for APAC, (x) where the proportion was 44% a decade ago. 4.0 3.8 The majority of emerging market mega borrowers in this rating range — classified 3.5 as issuers with USD30 billion or more of adjusted debt over our rating horizon in APAC and USD10 billion or higher in LatAm — are located in China (nine of 20), Brazil (three) 3.3 and Mexico (three), the largest economies of both regions, respectively, and in the case 3.0 of China, among the largest globally. The higher debt cut-off point used to define a 2.8 mega borrower in APAC compared with LatAm reflects the larger number of Fitch-rated 2.5 government related entities (GREs) in China alone (32), compared with the entire LatAm 2016 2017 2018F 2019F 2020F region (18), tilting the scale in our sample above USD30 billion in that market. F – Forecast. Source: Fitch Ratings. The gross adjusted debt of the top 20 GREs rated by Fitch since 2008 has almost tripled to over USD1 trillion. Debt raised by corporate GREs has been a major driver of increasing Total Adjusted Net Debt/EBITDAR — emerging market corporate indebtedness. Eleven of the 21 issuers listed in this report ‘BBB’ Category Medians are GREs holding USD532 billion of debt between them, accounting for 61% of the APAC LatAm (x) total adjusted rating horizon debt of USD870 billion for all the emerging market mega borrowers. APAC GRE mega borrowers comprise six of 12 issuers and LatAm GRE mega 3.3 borrowers represent five of nine issuers. 3.0 The emerging market mega borrower with the largest rating horizon adjusted debt 2.8 balance is Petroleos Mexicanos (PEMEX, BBB–/Negative) with USD109 billion, followed 2.5 by Petroleo Brasileiro S.A. (Petrobras, BB–/Stable) with USD82 billion. The inclusion of Petrobras at ‘BB–’ is an exception due to its established status as a mega borrower 2.3 in LatAm and its stand-alone credit profile being close to investment grade at ‘BB+’. 2.0 The third largest is CK Hutchison Holdings Limited (A–/Stable), with USD63 billion. 2016 2017 2018F 2019F 2020F Fourth through seventh place are Chinese GREs: China National Chemical Corporation F – Forecast. Limited (A–/Stable), China Communications Construction Company Limited Source: Fitch Ratings. (A–/Stable), Power Construction Corporation of China (A–/Stable) and China Minmetals Corporation (BBB+/Stable), together representing over USD230 billion of adjusted debt. FFO Interest Coverage — The third-largest borrower in LatAm is America Movil S.A.B. de C.V. (A–/Stable), with ‘BBB’ Category Medians USD32 billion of adjusted debt. Vale S.A. (BBB–/Rating Watch Negative) is the fourth- APAC LatAm (x) largest LatAm mega borrower, with USD23 billion over the rating horizon. 6.5 The sectors with the highest representation of emerging market mega borrowers are 6.0 Metals & Mining (four of 21, two of which are GREs) jointly with Oil & Gas (four of 21, all of which are GREs) and Building Materials & Construction (three of 21, also all GREs). 5.5 5.0 Individual forecast snapshots that include rating derivation summaries, rating action sensitivities and forecast assumptions follow for each emerging market mega borrower. 4.5 4.0 EM Mega Borowers’ Rating Horizon Adjusted Debt Split 2016 2017 2018F 2019F 2020F (Approximately USD790 Billion Total) F – Forecast. Vale Codelco Ecopetrol CFE Braskem Source: Fitch Ratings. 3% 2% 1% 1% PLN 3% Suzano 3% 1% FCF Margin — PEMEX ‘BBB’ Category Medians China Railway Group 13% 3% APAC LatAm Petrobras (%) HBIS Group 9% 2.0 4% 1.5 CK Hutchison America Movil 1.0 7% 0.5 4% ChemChina 0.0 (0.5) RIL 7% 4% (1.0) CCCC (1.5) Poly Developments (2.0) 5% 7% PCCC (2.5) Shougang Group Country Garden China Minmetals 7% 2016 2017 2018F 2019F 2020F 5% 6% 6% F – Forecast. Source: Fitch Ratings. Source: Fitch Ratings. www.fitchratings.com | April 2019 4 Corporate Finance

Emerging Market Mega Borrowers in APAC and LatAm

Mega Borrower IDR/Outlook Adjusted Rating Horizon Debt (USD billion)

Pemex BBB–/Negative 109 a Petrobras BB–/Stable 82 CK Hutchison Holdings Limited A–/Stable 63 China National Chemical Corporation Limited A–/Stable 61 China Communications Construction Company Limited A–/Stable 60 Power Construction Corporation of China A–/Stable 57 China Minmetals Corporation BBB+/Stable 53 Country Garden Holdings Co. Ltd BBB–/Stable 48 Shougang Group Co., Ltd A–/Stable 45 Poly Developments and Holdings Group Co., Ltd. BBB+/Stable 40 Reliance Industries Ltd BBB–/Stable 34 America Movil A–/Stable 32 HBIS Group Co., Ltd. BBB+/Stable 32 China Railway Group Limited A–/Stable 30 PT Perusahaan Listrik Negara (Persero) BBB/Stable 27 Comision Federal de Electicidad (CFE) BBB+/Negative 25 Vale BBB–/RWN 23 Codelco A–/Stable 16 Ecopetrol BBB/Stable 12 Suzano Papel e Celulose S.A. BBB–/Stable 11 Braskem BBB–/Stable 10 aFinancial debt only. IDR – Issuer Default Rating. RWN – Rating Watch Negative. Source: Fitch Ratings, Fitch Solutions.

Rating Level Split of EM Mega Rating Horizon Adjusted Debt Country Split of EM Sector Split of EM Borrowers Split of GRE Versus Non-GRE Mega Borrowers Mega Borrowers (As of Feb. 26, 2019) EM Mega Borrowers Utilities Building Materials BB– Telecom 10% & Construction 5% Mexico 5% 14% A– Non- 15% Brazil Pulp & Chemicals BBB– 38% GRE 19% Paper 10% 29% 39% Indonesia 5% 5% Hong Chile Kong 4% 5% India 5% Oil & Colombia Gas Diversified BBB GRE 5% 19% Services 9% 61% BBB+ 10% China 19% Metals & Mining 43% Homebuilding 19% 10% GRE – Government-related entity. EM – Emerging market. EM – Emerging market. EM – Emerging market. EM – Emerging market. Source: Fitch Ratings. Source: Fitch Ratings. Source: Fitch Ratings. Source: Fitch Ratings.

www.fitchratings.com | April 2019 5 Corporate Finance

Emerging Market Mega Borrowers in APAC and LatAm (Continued)

APAC Mega Borrowers LatAm Mega Borrowers

Margins — APAC Commodities Sector Medians Margins — LatAm Commodities Sector Medians EBITDA Margin CFFO Margin FFO Margin EBITDA Margin CFFO Margin FFO Margin (%) (%) 25 40 35 20 30 15 25 20 10 15 10 5 5 0 0 2016 2017 2018F 2019F 2020F 2016 2017 2018F 2019F 2020F CFFO – Cash f low f rom operations. F – Forecast. CFFO – Cash f low f rom operations. F – Forecast. Source: Fitch Ratings, Fitch Solutions, company reports. Source: Fitch Ratings, Fitch Solutions, company reports.

Margins — APAC Industrials Sector Medians Margins — LatAm Industrials Sector Medians EBITDA Margin CFFO Margin FFO Margin EBITDA Margin CFFO Margin FFO Margin (%) (%) 30 25 25 20 20 15 15 10 10 5 5 0 0 2016 2017 2018F 2019F 2020F 2016 2017 2018F 2019F 2020F CFFO – Cash f low f rom operations. F – Forecast. CFFO – Cash f low f rom operations. F – Forecast. Source: Fitch Ratings, Fitch Solutions, company reports. Source: Fitch Ratings, Fitch Solutions, company reports.

Margins — APAC Consumer and Margins — LatAm Consumer and Healthcare Sector Medians Healthcare Sector Medians EBITDA Margin CFFO Margin FFO Margin (%) EBITDA Margin CFFO Margin FFO Margin (%) 20 20 16 15 12 10 8 4 5 0 0 2016 2017 2018F 2019F 2020F 2016 2017 2018F 2019F 2020F CFFO – Cash f low f rom operations. F – Forecast. CFFO – Cash f low f rom operations. F – Forecast. Source: Fitch Ratings, Fitch Solutions, company reports. Source: Fitch Ratings, Fitch Solutions, company reports.

Margins — APAC TMT Sector Medians Margins — LatAM TMT Sector Medians EBITDA Margin CFFO Margin FFO Margin EBITDA Margin CFFO Margin FFO Margin (%) (%) 35 35 30 30 25 25 20 20 15 15 10 10 5 5 0 0 2016 2017 2018F 2019F 2020F 2016 2017 2018F 2019F 2020F CFFO – Cash f low f rom operations. F – Forecast. CFFO – Cash f low f rom operations. F – Forecast. Source: Fitch Ratings, Fitch Solutions, company reports. Source: Fitch Ratings, Fitch Solutions, company reports.

www.fitchratings.com | April 2019 6 Corporate Finance Mega Borrower LatAm

America Movil S.A.B. de C.V. Issuer Default Rating A–/Stable

Derivation Summary Rating Horizona Adjusted Debt Balance USD32 billion a2017A–2020F average. America Movil S.A.B. de C.V.’s ratings reflect its status as the regional leader in Latin America. The company’s high level of geographic diversification and leading market shares compare favorably with peers AT&T Inc. (A–/Stable), Fitch 2019 Forecast Cash Flow Waterfall: America Movil Verizon Communications Inc. (A–/Stable) and Deutsche Telekom AG (BBB+/Stable), and are in line with direct competitor Telefonica SA (BBB/Stable). The company has (USD Mil.) the most conservative leverage profile of this peer group, and Fitch expects itto 14,000 strengthen further in the near term. The company’s EBITDA generation lags its peers 12,000 due to operating dynamics in Latin America. 10,000 All the carriers face very competitive environments, which Fitch expects will 8,000 limit profitability. However, America Movil’s prospects are somewhat brighter, as 6,000 smartphone and broadband penetration rates throughout Latin America are relatively 4,000 low. Conversely, America Movil and Telefonica are more exposed to emerging market 2,000 turmoil and foreign exchange volatility, given their operating footprint. No parent/ 0 subsidiary linkage, operating environment or Country Ceiling influence is in effect for (2,000) the ratings. Rating Sensitivities CFFO – Cash flow from operations. M&A – Net mergers and acquisitions. Positive Rating Action Sensitivities ND – Net debt. NE – Net equity. Cash – Readily available cash and equivalents. • Total adjusted net debt/EBITDAR falling below 1.5x on a sustained basis. Source: Fitch Solutions, America Movil S.A.B. de C.V. Negative Rating Action Sensitivities Fitch Leverage Forecast: America Movil • Total adjusted net debt/EBITDAR rising above 2.5x on a sustained basis, due to FFO-Adjusted Leverage a combination of competitive pressure throughout the region eroding margins, FFO-Adjusted Net Leverage investment requirements and/or shareholder distributions compromising Total Adjusted Debt/Operating EBITDAR (x) FCF generation. Total Adjusted Net Debt/Operating EBITDAR 4.0 Fitch’s Key Assumptions Within Our Rating Case for the

Issuer Include: 3.0 • Low to midsingle-digit revenue growth, buoyed by improving prospects in key markets. 2.0 • EBITDA margins improving to the high 20% range. • Capital intensity in the mid-teens range over the medium term, as the company 1.0 invests in fiber and 4G expansion. • Absence of large shareholder distributions as the company focuses on 0.0 deleveraging in the near term. 2015 2016 2017 2018F 2019F 2020F F – Forecast. Source: Fitch Solutions, America Movil S.A.B. de C.V. Fitch Coverage Forecast: America Movil FFO Interest Coverage Operating EBITDAR/Interest Paid + Rents (x) 14 12 10 8 6 4 2 0 2015 2016 2017 2018F 2019F 2020F

F – Forecast. Source: Fitch Solutions, America Movil S.A.B. de C.V. www.fitchratings.com | April 2019 7 Corporate Finance Mega Borrower LatAm

Braskem S.A. Issuer Default Rating BBB–/Stable

Derivation Summary Rating Horizona Adjusted Debt Balance USD10 billion a2017A–2020F average. Braskem S.A.’s leading position in the Americas in its core products — polyethylene and polypropylene — is a key credit strength, mitigating the commodity nature of its products, which are characterized by volatile raw material prices and price-driven Fitch 2019 Forecast Cash Flow Waterfall: Braskem competition. Braskem has a medium scale compared with global chemical peers, such as Dow Chemical Company (BBB+/Stable), yet it is well positioned relative to (USD Mil.) Latin American peers, such as Mexichem, S.A.B. de C.V. (BBB/Stable) and Alpek, 3,000 S.A.B. de C.V. (BBB–/Stable), in terms of scale, profitability and geographic diversification. Around 40% of the company’s EBITDA is generated outside Brazil. 2,500 Braskem’s thermoplastic resin operations in Brazil are integrated, which helps 2,000 reduce the volatility of cash flows. In Mexico, its profitability is expect to remain 1,500 above industry’s average as a result of an attractive long-term raw material supply agreement with Petroleos Mexicanos (PEMEX). The company’s strong market-share 1,000 position in Brazil (65%–70%) is also a competitive advantage, as it allows Braskem 500 to better withstand raw material price increases and pass-through strategies. 0 The company’s adequate net leverage (2.5x) through the petrochemical cycle and strong liquidity are key rating drivers. Braskem’s leverage compares well with Mexichem and Alpek, while it is higher than Dow. No Country Ceiling or parent/ subsidiary aspects affect the rating. CFFO – Cash flow from operations. M&A – Net mergers and acquisitions. Rating Sensitivities ND – Net debt. NE – Net equity. Cash – Readily available cash and equivalents. Source: Fitch Solutions, Braskem S.A. Positive Rating Action Sensitivities Fitch Leverage Forecast: Braskem • Elimination of uncertainties regarding changes in the contract with PEMEX. FFO-Adjusted Leverage • Elimination of covenant breaches in Braskem Idesa S.A.P.I’s project finance. FFO-Adjusted Net Leverage • Sustainability of Mexico’s project profitability under different petrochemical Total Adjusted Debt/Operating EBITDAR product price scenarios, with Braskem’s consolidated EBITDA margin (x) Total Adjusted Net Debt/Operating EBITDAR sustainable above 19%. 5.0

• Consolidated net debt/EBITDA, including Braskem Idesa, consistently 4.0 below 2.5x. • Positive FCF generation across the cycle. 3.0 • No pressure from shareholder dividends. 2.0

Negative Rating Action Sensitivities 1.0 • Higher than expected dividend request by shareholders. 0.0 • Net adjusted leverage, including Braskem Idesa, above 3.5x on a sustainable 2015 2016 2017 2018F 2019F 2020F basis. F – Forecast. • A change in Braskem’s management strategy that alters its adequate financial Source: Fitch Solutions, Braskem S.A. profile with robust liquidity position and long-term debt schedule. Fitch Coverage Forecast: Braskem Fitch’s Key Assumptions Within Our Rating Case for the Issuer Include: FFO Interest Coverage (x) Operating EBITDAR/Interest Paid + Rents • Total volume growing by low single digits in 2018, with a slight improvement in 2019. 12 • Naphtha prices following Fitch’s oil price deck of USD65 in 2018, USD60 in 2019 10 and USD55 in the long term. 8 • Narrowing spreads giving new capacity coming on line in 2019. 6 • No significant dividend payment from Braskem Idesa before late 2019, or around USD50 million–USD60 million if occurring. 4

• Braskem Idesa’s utilization rate moving to around 85% until 2020. 2 • Payouts of 25% net income from 2019 on. 0 2015 2016 2017 2018F 2019F 2020F F – Forecast. Source: Fitch Solutions, Braskem S.A. www.fitchratings.com | April 2019 8 Corporate Finance Mega Borrower APAC

China Communications Construction Company Limited Issuer Default Rating A–/Stable

Derivation Summary Rating Horizona Adjusted Debt Balance USD60 billion a2017A–2020F average. China Communications Construction Company Limited’s IDR of ‘A–’, which is notched from China’s Long-Term IDR of ‘A+’, reflects its strong status as a government-related entity. CCCC’s strategic importance to the state is comparable to that of other large Fitch 2019 Forecast Cash Flow Waterfall: SASAC-owned E&C companies that operate in sectors with only one or two dominant China Comm. Construction players, such as China Railway Group Limited (A–/Stable) in railway engineering and construction (E&C), Power Construction Corporation of China (A–/Stable) (USD Mil.) in hydropower construction and China Energy Engineering Corporation Limited 15,000 (A–/Stable) in thermal power construction. All these entities are rated two notches 10,000 below the sovereign using the top-down approach set out in Fitch’s Government- Related Entities Rating Criteria, reflecting their strong linkages with the state. We 5,000 assess CCCC’s stand-alone credit (SCP) profile at ‘B+’. 0 Rating Sensitivities (5,000) (10,000) Positive Rating Action Sensitivities • Positive rating action on the Chinese sovereign. • Strengthening linkage between CCCC and the Chinese sovereign. Negative Rating Action Sensitivities CFFO – Cash flow from operations. M&A – Net mergers and acquisitions. ND – Net debt. NE – Net equity. Cash – Readily available cash and equivalents. • Negative rating action on the Chinese sovereign. Source: Fitch Solutions, China Communications Construction Company Limited. • Weakening linkage between CCCC and China Communications Fitch Leverage Forecast: China Comm. Construction Construction Group. FFO-Adjusted Leverage • Weakening linkage between CCCC and the Chinese sovereign. FFO-Adjusted Net Leverage Total Adjusted Debt/Operating EBITDAR For the sovereign rating of China, the following sensitivities were (x) Total Adjusted Net Debt/Operating EBITDAR outlined by Fitch in its rating action commentary on Dec. 4, 2018: 10 Positive Rating Action Sensitivities 8

• An orderly resolution of the economywide debt problem and a reduction in 6 financial imbalances without a material negative impact on growth. 4 • A high degree of confidence that the economy’s pervasive contingent liabilities are unlikely to pose a risk to the sovereign balance sheet, for example through 2 tangible evidence that implicit government support for state-linked companies will no longer be forthcoming. 0 2015 2016 2017 2018F 2019F 2020F • Widespread adoption of the Chinese yuan as a reserve currency. F – Forecast. Negative Rating Action Sensitivities Source: Fitch Solutions, China Communications Construction Company Limited. • Policy settings that lead to a further buildup of financial imbalances Fitch Coverage Forecast: China Comm. Construction and vulnerabilities. FFO Interest Coverage • An adverse macro shock that weakens medium-term growth prospects or Operating EBITDAR/Interest Paid + Rents public finances. (x) • Sustained capital outflows sufficient to erode China’s external balance 3.0 sheet strengths. 2.5

Fitch’s Key Assumptions Within Our Rating Case for the 2.0 Issuer Include: 1.5 • Revenue growth around 5%–7% in 2018–2021. • EBITDA margin around 8.0% in 2018–2021. 1.0 • Capital intensity around 8.4%–8.7% in 2018–2021. 0.5

0.0 2015 2016 2017 2018F 2019F 2020F F – Forecast. Source: Fitch Solutions, China Communications Construction Company Limited. www.fitchratings.com | April 2019 9 Corporate Finance Mega Borrower APAC

China Minmetals Corporation Issuer Default Rating BBB+/Stable

Derivation Summary Rating Horizona Adjusted Debt Balance USD53 billion a2017A–2020F average. China Minmetals Corporation’s rating is three-notches below China’s rating and is comparable with Aluminum Corporation of China Limited (BBB+/Stable), which serves a similar mission for the Chinese government. Minmetals’ linkage is weaker than that Fitch 2019 Forecast Cash Flow Waterfall: of peers, such as China Railway Group Limited (A–/Stable) and Power Construction China Minmetals Corporation of China (A–/Stable), which hold near-monopoly and strategically irreplaceable positions in their respective fields, and are rated two notches below (USD Mil.) (USD Mil.) China’s rating. 3,000 16,000 2,500 14,000 Rating Sensitivities 12,000 2,000 10,000 Positive Rating Action Sensitivities 1,500 8,000 1,000 6,000 • Positive rating action on the Chinese sovereign. 4,000 500 2,000 • Strengthening linkages between Minmetals and the Chinese sovereign. 0 0 Negative Rating Action Sensitivities • Negative rating action on the Chinese sovereign. • Weakening linkages between Minmetals and the Chinese sovereign. CFFO – Cash Flow from Operations. M&A – Net mergers and acquisitions. For the sovereign rating of China, the following sensitivities were ND – Net debt. NE – Net equity. Cash – Readily available cash and equivalents. Source: Fitch Solutions, China Minmetals Corporation. outlined by Fitch in its rating action commentary on Dec. 4, 2018: Fitch Leverage Forecast: China Minmetals Positive Rating Action Sensitivities FFO-Adjusted Leverage • An orderly resolution of the economywide debt problem and a reduction in FFO-Adjusted Net Leverage financial imbalances without a material negative impact on growth. Total Adjusted Debt/Operating EBITDAR (x) Total Adjusted Net Debt/Operating EBITDAR • A high degree of confidence that the economy’s pervasive contingent liabilities 20 are unlikely to pose a risk to the sovereign balance sheet, for example through tangible evidence that implicit government support for state-linked companies will no longer be forthcoming. 15 • Widespread adoption of the Chinese yuan as a reserve currency. 10 Negative Rating Action Sensitivities • Policy settings that lead to a further buildup of financial imbalances 5 and vulnerabilities. 0 • An adverse macro shock that weakens medium-term growth prospects or 2015 2016 2017 2018F 2019F 2020F public finances. F – Forecast. • Sustained capital outflows sufficient to erode China’s external balance Source: Fitch Solutions, China Minmetals Corporation. sheet strengths. Fitch’s Key Assumptions Within Our Rating Case for the Fitch Coverage Forecast: China Minmetals Issuer Include: FFO Interest Coverage Operating EBITDAR/Interest Paid + Rents • Copper price of USD6,700 per tonne (t) in 2018, USD6,700/t in 2019 and (x) USD6,800/t in 2020. 3.0 • Zinc price of USD3,300/t in 2018, USD2,800/t in 2019 and USD2,600/t in 2020. 2.5 • Iron ore price of USD60/t in 2018, USD55/t in 2019 and USD55/t in 2020. 2.0 • No major M&A in the next three years. 1.5 • EBITDA margin to stay around 9.0% in the next three years. • Capex of CNY12 billion per year in the next three years. 1.0 0.5

0.0 2015 2016 2017 2018F 2019F 2020F F – Forecast. Source: Fitch Solutions, China Minmetals Corporation. www.fitchratings.com | April 2019 10 Corporate Finance Mega Borrower APAC

China National Chemical Corporation Limited Issuer Default Rating A–/Stable

Derivation Summary Rating Horizona Adjusted Debt Balance USD61 billion a2017A–2020F average. China National Chemical Corporation Limited’s (ChemChina) IDR is notched from China’s Long-Term IDR of ‘A+’ to reflect its strong status as the main government- related entity the government uses to invest in the chemical industry, particularly Fitch 2019 Forecast Cash Flow Waterfall: overseas. ChemChina’s investments and operations in the agrochemical sector — China National Chemical including crop protection, fertilizers and seeds— are of higher importance to the state compared with other government-related entities (GREs) that act as primary investment (USD Mil.) (USD Mil.) vehicles in other more competitive industries such, as China Minmetals Corporation 5,000 12,000 (BBB+/Stable) and Aluminum Corporation of China Limited (BBB+/Stable). ChemChina 4,000 10,000 is rated lower than Sinochem Hong Kong (Group) Company Limited (Sinochem HK, 8,000 A/Stable) as Sinochem HK has a much more extensive distribution network for seeds 3,000 6,000 and agrochemicals in China’s rural areas, and the promotion of food safety cannot be 2,000 conducted without Sinochem HK, implying a default by the company would have a 4,000 larger sociopolitical impact. 1,000 2,000 Rating Sensitivities 0 0 Positive Rating Action Sensitivities • Strengthening of linkages between ChemChina and Central SASAC. CFFO – Cash Flow from Operations. M&A – Net mergers and acquisitions. • Improvement in ChemChina’s SCP, provided linkages between ChemChina and ND – Net debt. NE – Net equity. Cash – Readily available cash and equivalents. Central SASAC remain intact. Source: Fitch Solutions, China National Chemical Corporation Limited. • Positive action on the Chinese sovereign. Fitch Leverage Forecast: China National Chemical Negative Rating Action Sensitivities FFO-Adjusted Leverage FFO-Adjusted Net Leverage • Weakening of linkages between ChemChina and Central SASAC. Total Adjusted Debt/Operating EBITDAR • Negative rating action on the Chinese sovereign. (x) Total Adjusted Net Debt/Operating EBITDAR 14 For the sovereign rating of China, the following sensitivities were 12 outlined by Fitch in its rating action commentary on Dec. 4, 2018: 10 Positive Rating Action Sensitivities 8 6 • An orderly resolution of the economywide debt problem and a reduction in financial imbalances without a material negative impact on growth. 4 • A high degree of confidence that the economy’s pervasive contingent liabilities 2 are unlikely to pose a risk to the sovereign balance sheet, for example through 0 tangible evidence that implicit government support for state-linked companies 2015 2016 2017 2018F 2019F 2020F will no longer be forthcoming. F – Forecast. • Widespread adoption of the Chinese yuan as a reserve currency. Source: Fitch Solutions, China National Chemical Corporation Limited. Negative Rating Action Sensitivities Fitch Coverage Forecast: China National Chemical • Policy settings that lead to a further buildup of financial imbalances FFO Interest Coverage and vulnerabilities. (x) Operating EBITDAR/Interest Paid + Rents • An adverse macro shock that weakens medium-term growth prospects or 3.5 public finances. 3.0 • Sustained capital outflows sufficient to erode China’s external balance sheet strengths. 2.5 Fitch’s Key Assumptions Within Our Rating Case for the 2.0 Issuer Include: 1.5 • Revenue growth in 2018 mostly driven by a full year of consolidation of 1.0 Syngenta AG, low single-digit revenue growth thereafter. 0.5 • EBITDA margin to be sustained between 10.5% and 11.0% between 2018 and 2020. 0.0 • No major acquisitions. 2015 2016 2017 2018F 2019F 2020F • Capex of around CNY15 billion per year between 2018 and 2020. F – Forecast. Source: Fitch Solutions, China National Chemical Corporation Limited. www.fitchratings.com | April 2019 11 Corporate Finance Mega Borrower APAC

China Railway Group Limited Issuer Default Rating A–/Stable

Derivation Summary Rating Horizona Adjusted Debt Balance USD30 billion a2017A–2020F average. China Railway Group Limited’s strategic importance to the sovereign is similar to some other large infrastructure construction companies that operate in subsegments with only one or two dominant players — for instance, China Communications Construction Fitch 2019 Forecast Cash Flow Waterfall: Company Limited (A–/Stable) in maritime construction and Power Construction Corporation of China (A–/Stable) in clean energy construction. The aforementioned China Railway Group entities are also rated on a top-down basis and two notches below the sovereign rating, (USD Mil.) (USD Mil.) in line with Fitch’s Government-Related Entities Rating Criteria and reflecting their similarly strong importance to the sovereign. Compared with other E&C peers in the same 3,500 20,000 3,000 SCP ‘BBB’ category, such as Shanghai Construction Group Co., Ltd. (BBB+/Stable; SCP: 16,000 BBB–), CRG has higher leverage, but a much larger business scale in terms of EBITDA. 2,500 2,000 12,000 Rating Sensitivities 1,500 8,000 1,000 Positive Rating Action Sensitivities 4,000 500 • Positive rating action on the Chinese sovereign. 0 0 • Strengthening linkages between CRG and China Railway Engineering Corporation (CREC). • Strengthening linkages between CREC and the Chinese sovereign.

• An upgrade in CRG’s current SCP would lead to a change in the extent of CFFO – Cash flow from operations. M&A – Net mergers and acquisitions. notching under Fitch’s GRE criteria. ND – Net debt. NE – Net equity. Cash – Readily available cash and equivalents. Negative Rating Action Sensitivities Source: Fitch Solutions, China Railway Group Limited. • Negative rating action on the Chinese sovereign. Fitch Leverage Forecast: China Railway Group • Weakening linkages between CRG and CREC. FFO-Adjusted Leverage FFO-Adjusted Net Leverage • Weakening linkages between CREC and the Chinese sovereign. Total Adjusted Debt/Operating EBITDAR Total Adjusted Net Debt/Operating EBITDAR SCP Positive Rating Action Sensitivities (x) • FFO-adjusted net leverage sustained below 1.5x (2017: 2.4x). 8.0 • EBITDA margin of sustained at over 7.0% (2017: 5.9%). 7.0 6.0 SCP Negative Rating Action Sensitivities 5.0 • FFO-adjusted net leverage above 3.0x for a sustained period. 4.0 For the sovereign rating of China, the following sensitivities were 3.0 2.0 outlined by Fitch in its rating action commentary on Dec. 4, 2018: 1.0 Positive Rating Action Sensitivities 0.0 2015 2016 2017 2018F 2019F 2020F • An orderly resolution of the economywide debt problem and a reduction in financial imbalances without a material negative impact on growth. F – Forecast. Source: Fitch Solutions, China Railway Group Limited. • A high degree of confidence that the economy’s pervasive contingent liabilities are unlikely to pose a risk to the sovereign balance sheet, for example through Fitch Coverage Forecast: China Railway Group tangible evidence that implicit government support for state-linked companies will no longer be forthcoming. FFO Interest Coverage Operating EBITDAR/Interest Paid + Rents • Widespread adoption of the Chinese yuan as a reserve currency. (x) Negative Rating Action Sensitivities 6.0 • Policy settings that lead to a further buildup of financial imbalances and vulnerabilities. 5.0 • An adverse macro shock that weakens medium-term growth prospects or 4.0 public finances. 3.0 • Sustained capital outflows sufficient to erode China’s external balance sheet strengths. 2.0 Fitch’s Key Assumptions Within Our Rating Case for the Issuer Include: 1.0 • CRG’s revenue to grow 0%–3% per year from 2018 to 2020. 0.0 2015 2016 2017 2018F 2019F 2020F • Stable EBITDA margin at over 5% from 2018 to 2020. F – Forecast. • Annual capex of around CNY15 billion from 2018 to 2020. Source: Fitch Solutions, China Railway Group Limited. www.fitchratings.com | April 2019 12 Corporate Finance Mega Borrower APAC

CK Hutchison Holdings Limited Issuer Default Rating A–/Stable

Derivation Summary Rating Horizona Adjusted Debt Balance USD63 billion a2017A–2020F average. CK Hutchison Holdings Limited’s ratings are supported by its diversified business — by geography and segment — providing it with stable cash flows and supporting its strong business profile. There are few peers with similar business models, as CKHH is Fitch 2019 Forecast Cash Flow Waterfall: CK Hutchison a conglomerate with infrastructure, ports, retail and telecoms segments. However, CKHH is somewhat comparable with CLP Holdings Limited (CLPH, A/Stable) although (USD Mil.) CLPH — an integrated and largely regulated utility through its key Hong Kong 20,000 business CLP Power Hong Kong Limited (A/Stable) — has a stronger business profile, and a historically more robust financial profile. 15,000

Rating Sensitivities 10,000

Positive Rating Action Sensitivities 5,000 • FFO-adjusted net leverage of 3.0x or less on a sustained basis. 0 • Positive FCF after acquisitions and dividends on a sustained basis. Negative Rating Action Sensitivities • FFO-adjusted net leverage exceeding 4.0x on a sustained basis. • Substantially negative FCF after acquisitions and disposals. CFFO – Cash flow from operations. M&A – Net mergers and acquisitions. ND – Net debt. NE – Net equity. Cash – Readily available cash and equivalents. • Significant changes in business mix and capital structure management adverse Source: Fitch Solutions, CK Hutchison Holdings Limited. to its credit risk profile. Fitch Leverage Forecast: CK Hutchison • A weakening in quality or decrease in proportion of recurring cash flows. FFO-Adjusted Leverage Fitch’s Key Assumptions Within Our Rating Case for the FFO-Adjusted Net Leverage Issuer Include: Total Adjusted Debt/Operating EBITDAR (x) Total Adjusted Net Debt/Operating EBITDAR • Fitch-adjusted EBITDA (reported EBITDA, less EBITDA contribution from 8.0 associates and joint ventures, plus dividends from associates and joint ventures) margin of 25%–26% in 2018–2020. 6.0 • Dividend increase of 6% in 2018 and 2% from 2019.

• Capex of HKD42.4 billion in 2018, HKD35.5 billion in 2019. 4.0 • Acquisition of 50% stake in Wind Tre SpA for EUR2.45 billion in 2018. 2.0 • Proceeds of around HKD14.4 billion from the sale of economic benefits from infrastructure assets in 2018. 0.0 2015 2016 2017 2018F 2019F 2020F F – Forecast. Source: Fitch Solutions, CK Hutchison Holdings Limited.

Fitch Coverage Forecast: CK Hutchison

FFO Interest Coverage (x) Operating EBITDAR/Interest Paid + Rents 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 2015 2016 2017 2018F 2019F 2020F F – Forecast. Source: Fitch Solutions, CK Hutchison Holdings Limited. www.fitchratings.com | April 2019 13 Corporate Finance Mega Borrower LatAm

Comision Federal de Electricidad (CFE) Issuer Default Rating BBB+/Negative

Derivation Summary Rating Horizona Adjusted Debt Balance USD25 billion a2017A–2020F average. Comision Federal de Electricidad’s (CFE) ‘BBB+’ rating is well positioned relative to its peers in the electric-corporate sector given its scale, diversification of operations, price-indexation mechanisms, profitability and positive FCF generation. It has a weaker Fitch 2019 Forecast Cash Flow Waterfall: CFE operating profile than similarly rated global peers, such as Enel Generacion Chile S.A. (BBB+/Positive), Enel Americas S.A. (BBB+/Stable), Colbun S.A. (BBB/Stable) and Elektra (USD Mil.) Noreste, S.A. (BBB/Stable) based on political interference through the electricity rate 4,000 settlement, establishment of subsidies, higher technical and nontechnical losses, and 3,500 continuing generation with heavy fuel oil. 3,000 2,500 Rating Sensitivities 2,000 1,500 Positive Rating Action Sensitivities 1,000 • Absent an improved operating and financial profile, an upgrade of CFE’s ratings 500 could result from an upgrade of Mexico’s sovereign rating or increased financial 0 support from the government. Negative Rating Action Sensitivities • A downgrade of the sovereign’s rating. • The perception of a lower degree of linkage between CFE and the sovereign CFFO – Cash flow from operations. M&A – Net mergers and acquisitions. as a result of the energy reform, in conjunction with a weak operating and ND – Net debt. NE – Net equity. Cash – Readily available cash and equivalents. financial profile. Source: Fitch Solutions, Comision Federal de Electricidad (CFE). Fitch’s Key Assumptions Within Our Rating Case for the Fitch Leverage Forecast: CFE Issuer Include: FFO-Adjusted Leverage • Revenue growth of around 2.0% beginning in 2019. FFO-Adjusted Net Leverage Total Adjusted Debt/Operating EBITDAR • EBITDA margin around 30%, adding the estimated actuarial cost of labor (x) Total Adjusted Net Debt/Operating EBITDAR obligations into EBITDA. 6.0 • Capex around MXN70 billion per year. • Cash balance around MXN55billion. 5.0 • Capex funded with cash from operations and debt. 4.0 • Debt/EBITDA levels around 3.5x. 3.0

2.0

1.0

0.0 2015 2016 2017 2018F 2019F 2020F F – Forecast. Source: Fitch Solutions, Comision Federal de Electricidad (CFE). Fitch Coverage Forecast: CFE FFO Interest Coverage Operating EBITDAR/Interest Paid + Rents (x) 7.0

6.0

5.0

4.0

3.0

2.0

1.0

0.0 2015 2016 2017 2018F 2019F 2020F F – Forecast. Source: Fitch Solutions, Comision Federal de Electricidad (CFE). www.fitchratings.com | April 2019 14 Corporate Finance Mega Borrower LatAm

Corporacion Nacional del Cobre de Chile (Codelco) Issuer Default Rating A–/Stable

Derivation Summary Rating Horizona Adjusted Debt Balance USD16 billion a2017A–2020F average. Corporacion Nacional del Cobre de Chile’s (Codelco) SCP at ‘BBB–’/Stable is comparable but somewhat weaker than Southern Copper Corporation (SCC; BBB+/ Stable). SCC is also a single-commodity producer, with the largest global reserve base Fitch 2019 Forecast Cash Flow Waterfall: Codelco and almost half the production scale of Codelco, but benefits from the world’s lowest copper cost structure, with a cash cost net of by-products of USD0.81/lb in 2Q18, (USD Mil.) versus Codelco’s 1.38/lb. The latter, in addition to lower mandatory cash outflows, 5,000 results in SCC’s stronger credit metrics, with a LTM net debt/EBITDA ratio of 1.6x as of June 2018, compared with Codelco’s 2.5x in the same period. 4,000 3,000 Rating Sensitivities 2,000 1,000 Positive Rating Action Sensitivities 0 • Positive rating action on Chile’s sovereign rating. (1,000) (2,000) • Strengthening links with the government in the form of explicit guarantees or cross-default provisions, or Codelco increasing contributions to the state to account for at least 10% participation in central government revenues on a sustained basis. • An upgrade of Codelco’s SCP would lead to an equalization of Codelco and CFFO – Cash flow from operations. M&A – Net mergers and acquisitions. Chile’s sovereign ratings at ‘A’. ND – Net debt. NE – Net equity. Cash – Readily available cash and equivalents. Source: Fitch Solutions, Corporacion Nacional del Cobre de Chile (Codelco). Negative Rating Action Sensitivities Fitch Leverage Forecast: Codelco • Absent a reduction of Codelco’s SCP, a one-notch downgrade of the Chilean sovereign rating would lead to an equalization of Codelco and the sovereign’s FFO-Adjusted Leverage ratings at ‘A–’ under Fitch’s Government-Related Entities Rating Criteria. FFO-Adjusted Net Leverage A multiple-notch downgrade of the sovereign may lead to a downgrade Total Adjusted Debt/Operating EBITDAR for Codelco. (x) Total Adjusted Net Debt/Operating EBITDAR • Weaker linkage with the ultimate parent, diminishing or irregular state financial 12 support, and weakening of CODELCO’s SCP. 10 Fitch’s Key Assumptions Within Our Rating Case for the 8 Issuer Include: 6

• Copper prices for Fitch’s midcycle price assumptions of USD2.90/pound in 4 2018, USD3.00/pound in 2019, USD3.10/pound in 2020 and USD3.20/pound in 2021 and beyond. 2 • Almost stable own-production volume at around 1.7 million metric tons. 0 2015 2016 2017 2018F 2019F 2020F • Molybdenum production at around 30,000 metric tons. F – Forecast. • Capex of USD3.6 billion in 2018, USD4.2 billion in 2019 and USD4.5 billion Source: Fitch Solutions, Corporacion Nacional del Cobre de Chile (Codelco). in 2020. Fitch Coverage Forecast: Codelco • 10% tax rate on exports, according to Ley Reservada commitment. FFO Interest Coverage • Cash costs (C1) of USD1.39/pound in 2018, USD1.40/pound in 2019 and Operating EBITDAR/Interest Paid + Rents USD1.41/pound in 2020 (x) 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 2015 2016 2017 2018F 2019F 2020F F – Forecast. Source: Fitch Solutions, Corporacion Nacional del Cobre de Chile (Codelco). www.fitchratings.com | April 2019 15 Corporate Finance Mega Borrower APAC

Country Garden Holdings Co. Ltd. Issuer Default Rating BBB–/Stable

Derivation Summary Rating Horizona Adjusted Debt Balance USD48 billion a2017A–2020F average. Country Garden Holdings Co. Ltd. has the largest contracted sales and EBITDA compared with Longfor Group Holdings Limited (BBB/Stable) and Shimao Property Holdings Limited (BBB–/Stable), and has higher churn than Shimao. This is offset by Fitch 2019 Forecast Cash Flow Waterfall: its lower EBITDA margin and smaller recurring EBITDA/interest coverage. Country Country Garden Holdings Garden’s leverage, measured by net debt/adjusted inventory, was 32.8% at end- June 2018, and is likely to remain below 35.0%, comparable to that of the other two (USD Mil.) (USD Mil.) companies. 3,000 35,000 30,000 Country Garden is rated one notch below Longfor because the latter has consistently 2,000 25,000 generated positive cash flow from operations (CFFO) to support the buildup of its strong 1,000 investment-property portfolio. Fitch expects Longfor’s recurring EBITDA/interest cover 20,000 to be around 0.7x by 2019, among the highest of China’s 10 largest homebuilders. 0 15,000 10,000 This attribute makes Longfor’s debt-servicing capacity more predictable. (1,000) 5,000 Rating Sensitivities (2,000) 0 Positive Rating Action Sensitivities • EBITDA margin sustained above 20% (2017: 20%). • Net debt/adjusted inventory ratio sustained below 30% (2017: 34%). CFFO – Cash flow from operations. M&A – Net mergers and acquisitions. ND – Net debt. NE – Net equity. Cash – Readily available cash and equivalents. • Sustained positive CFFO, net of investments in joint ventures (JVs) and Source: Fitch Solutions, Country Garden Holdings Co. Ltd. associates (2017: CNY 4.4 billion). Fitch Leverage Forecast: Country Garden Holdings Negative Rating Action Sensitivities FFO-Adjusted Leverage • Net debt/adjusted inventory ratio sustained above 35%. FFO-Adjusted Net Leverage Total Adjusted Debt/Operating EBITDAR • Attributable contracted sales/gross debt ratio sustained below 1.5x (2017: 1.5x). (x) Total Adjusted Net Debt/Operating EBITDAR • Sustained negative CFFO, net of investments in JVs and associates. 14 Fitch’s Key Assumptions Within Our Rating Case for the 12 Issuer Include: 10 • Attributable contracted sales of CNY520 billion in 2018 and increasing by 8 10%–15% per year in 2019–2020. 6 • Land premium of around 60% of sales proceeds in 2018 and 45%–50% in 4 2019–2020, and securing sufficient land bank for 3.5–4.0 years of development. 2 • Gross profit margin to be maintained above 25% in 2018–2020. 0 • Capex of CNY4 billion in 2018, followed by CNY10 billion annually thereafter, 2015 2016 2017 2018F 2019F 2020F with the majority for the robotics business. F – Forecast. Source: Fitch Solutions, Country Garden Holdings Co. Ltd. Fitch Coverage Forecast: Country Garden Holdings FFO Interest Coverage (x) Operating EBITDAR/Interest Paid + Rents 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 2015 2016 2017 2018F 2019F 2020F F – Forecast. Source: Fitch Solutions, Country Garden Holdings Co. Ltd. www.fitchratings.com | April 2019 16 Corporate Finance Mega Borrower LatAm

Ecopetrol S.A. Issuer Default Rating BBB/Stable

Derivation Summary Rating Horizona Adjusted Debt Balance USD12 billion a2017A–2020F average. Ecopetrol S.A.’s rating linkage to the Colombian sovereign ratings is in line with the linkage present for most national oil and gas companies (NOCs) in the region, including Petroleos Mexicanos (PEMEX, BBB–/Negative), Petroleo Brasileiro S.A. Fitch 2019 Forecast Cash Flow Waterfall: Ecopetrol (Petrobras, BB–/Stable), Petroleos de Venezuela S.A. (PDVSA, Restricted Default), Petroleos del Peru – Petroperu S.A. (BBB+/Stable) and Empresa Nacional del Petroleo (USD Mil.) (Enap, A/Stable). In most cases in the region, NOCs are of significant strategic 6,000 importance for energy supply to the countries were they operate, as is the case in 5,000 Mexico, Colombia, Venezuela and Brazil. NOCs can also serve as a proxy for federal government funding, as in Mexico and Venezuela, and may have strong legal ties 4,000 to governments through majority ownership, strong control and governmental 3,000 budgetary approvals. Ecopetrol’s SCP is commensurate with a ‘BBB’ rating, which is 2,000 four notches higher than that of Petrobras at ‘BB–’, given Petrobras’ higher leverage 1,000 level, and despite the significantly higher expected production volumes of 3.1 million 0 barrels of oil equivalent (mmboe) by 2020. Ecopetrol exhibited 1.3x gross leverage as (1,000) of September 2018, versus Petrobras’ 4.1x for the same period. Ecopetrol’s SCP is nine notches higher than PEMEX’s ‘CCC’ SCP as a result of Ecopetrol’s deleveraging capital structure, versus PEMEX’s increasing leverage trajectory. Furthermore, Ecopetrol has reported and is expected to continue reporting CFFO – Cash flow from operations. M&A – Net mergers and acquisitions. stable production, which Fitch expects to stabilize between 700,000 barrels of oil ND – Net debt. NE – Net equity. Cash – Readily available cash and equivalents. equivalent per day (boe/d) and 750,000boe/d. In contrast, PEMEX’s crude production Source: Fitch Solutions, Ecopetrol S.A. has been declining in recent years and is not expected to stabilize in the short term. These production trajectories further support the notching differential between the Fitch Leverage Forecast: Ecopetrol two companies’ SCPs. FFO-Adjusted Leverage FFO-Adjusted Net Leverage Rating Sensitivities Total Adjusted Debt/Operating EBITDAR Positive Rating Action Sensitivities (x) Total Adjusted Net Debt/Operating EBITDAR 5.0 • An upgrade of Colombia’s sovereign ratings. Negative Rating Action Sensitivities 4.0 • A downgrade of Colombia’s sovereign ratings. 3.0

• A significant weakening of the company’s linkage with the government and a 2.0 lower government incentive to support, along with a deterioration of its SCP. Fitch’s Key Assumptions Within Our Rating Case for the 1.0

Issuer Include: 0.0 • Ecopetrol remains majority owned by the Republic of Colombia. 2015 2016 2017 2018F 2019F 2020F F – Forecast. • Brent and West Texas Intermediate oil prices trend toward USD57.5/barrel (bbl) Source: Fitch Solutions, Ecopetrol S.A. and USD55/bbl, respectively, in the long term. • Stable production, trending toward 750,000boe/d by 2021. Fitch Coverage Forecast: Ecopetrol • Aggregate capex of approximately USD13 billion between 2019 and 2022. FFO Interest Coverage (x) Operating EBITDAR/Interest Paid + Rents • Dividends of 45% of previous year’s net income. 14

12

10

8

6

4

2

0 2015 2016 2017 2018F 2019F 2020F F – Forecast. Source: Fitch Solutions, Ecopetrol S.A. www.fitchratings.com | April 2019 17 Corporate Finance Mega Borrower APAC

HBIS Group Co., Ltd. Issuer Default Rating BBB+/Stable

Derivation Summary Rating Horizona Adjusted Debt Balance USD32 billion a2017A–2020F average. HBIS Group Co., Ltd.’s economic contribution to its region is higher than that of Shougang Group Co., Ltd. (A–/Stable), whose rating is linked to the Beijing municipality, but it has a weaker strategic and public-service role. Fitch’s internal assessment of Fitch 2019 Forecast Cash Flow Waterfall: HBIS Group Beijing is also higher than that of Hebei province. HBIS is rated at the same level as China Minmetals Corporation (BBB+/Stable) and Aluminum Corporation of China (USD Mil.) Limited (BBB+/Stable), both of which are linked to China’s central government SASAC. 2,500 Rating Sensitivities 2,000 1,500 Positive Rating Action Sensitivities 1,000 500 • An upgrade of Fitch’s internal assessment of Hebei province’s creditworthiness. 0 • Increasing likelihood of support from the Hebei government. (500) Negative Rating Action Sensitivities (1,000) • A lowering of Fitch’s internal assessment of Hebei province’s creditworthiness. • Weakening of likelihood of support from the Hebei government.

Fitch’s Key Assumptions Within Our Rating Case for the CFFO – Cash flow from operations. M&A – Net mergers and acquisitions. Issuer Include: ND – Net debt. NE – Net equity. Cash – Readily available cash and equivalents. Source: Fitch Solutions, HBIS Group Co., Ltd. • Revenue to reach CNY315 billion in 2018 and normalize to between CNY300 billion and CNY310 billion from 2019 to 2021. Fitch Leverage Forecast: HBIS Group • EBITDA margin of 8.1%–8.5% from 2019 to 2021. FFO-Adjusted Leverage FFO-Adjusted Net Leverage • Capex of CNY17.7 billion per year from 2018 to 2020 and CNY13.7 billion Total Adjusted Debt/Operating EBITDAR for 2021. (x) Total Adjusted Net Debt/Operating EBITDAR 14 12 10 8 6 4 2 0 2015 2016 2017 2018F 2019F 2020F F – Forecast. Source: Fitch Solutions, HBIS Group Co., Ltd. Fitch Coverage Forecast: HBIS Group FFO Interest Coverage Operating EBITDAR/Interest Paid + Rents (x) 2.5

2.0

1.5

1.0

0.5

0.0 2015 2016 2017 2018F 2019F 2020F F – Forecast. Source: Fitch Solutions, HBIS Group Co., Ltd. www.fitchratings.com | April 2019 18 Corporate Finance Mega Borrower LatAm

Petroleo Brasileiro S.A. (Petrobras) Issuer Default Rating BB–/Stable

Derivation Summary Rating Horizona Financial Debt Balance USD82 billion a2017A–2020F average. Petroleo Brasileiro S.A.’s (Petrobras) linkage to the sovereign is similar in nature to its peers, namely Petroleos Mexicanos (PEMEX, BBB–/Negative), Ecopetrol S.A. (BBB/Stable) and YPF S.A. (B/Negative). It also compares with Empresa Nacional del Petroleo (ENAP, Fitch 2019 Forecast Cash Flow Waterfall: Petrobras A/Stable), Petroleos del Peru - Petroperu S.A. (BBB+/Stable) and Petroleos de Venezuela S.A. (PDVSA, Restricted Default). All have strong linkages to their respective sovereigns, (USD Mil.) given their strategic importance and the potentially significant negative sociopolitical and 25,000 financial implications a default by any of these entities could have for their countries. 20,000 Petrobras’ SCP is commensurate with a ‘BB+’ rating, which is materially higher than 15,000 PEMEX’s ‘CCC’ SCP as a result of Petrobras’ positive deleverage trajectory versus PEMEX’s increasing leverage trajectory. Furthermore, Petrobras reported and is 10,000 expected to continue reporting positive FCF and production growth, which Fitch 5,000 expects to stabilize at approximately 3.5 million barrels of oil equivalent per day (boe/d) 0 in the next four to five years. In contrast, PEMEX reported a production decline of 12% between January 2018 and January 2019. These production trajectories further (5,000) support the notching differential between the two companies’ SCPs. Petrobras’ SCP is two notches lower than that of Ecopetrol at ‘BBB’ given Petrobras’ higher leverage level; Petrobras’ gross leverage as of year-end 2018 was 2.7x, versus Ecopetrol’s 1.2x.

CFFO – Cash flow from operations. M&A – Net mergers and acquisitions. Rating Sensitivities ND – Net debt. NE – Net equity. Cash – Readily available cash and equivalents. Source: Fitch Solutions, Petroleo Brasileiro S.A. Positive Rating Action Sensitivities • A positive rating action on Brazil could lead to a positive rating action Fitch Leverage Forecast: Petrobras on Petrobras. FFO-Adjusted Leverage FFO-Adjusted Net Leverage Negative Rating Action Sensitivities Total Adjusted Debt/Operating EBITDAR • A negative rating action on Petrobras could result from a downgrade of the (x) Total Adjusted Net Debt/Operating EBITDAR sovereign and/or the perception of a lower linkage between Petrobras and the 6.0 government, coupled with a material deterioration of Petrobras’ SCP. 5.0 Fitch’s Key Assumptions Within Our Rating Case for the Issuer Include: 4.0 • Gross production to increase to approximately 3.5 million boe/d over the next 3.0 four years. 2.0

• Ten production units come online during the next four years. 1.0

• The company relies partially on external financing to meet principal payments. 0.0 • Brent crude averages USD65/barrel (bbl) in 2019; trends to USD57.5/bbl 2015 2016 2017 2018 2019F 2020F by 2022. F – Forecast. Source: Fitch Solutions, Petroleo Brasileiro S.A. • Average FX rate trends toward BRL3.9/USD. • Dividends payout ratio of 33%, which is higher than Brazil’s mandatory Fitch Coverage Forecast: Petrobras minimum rate of 25% of net income starting in 2019. FFO Interest Coverage • Proceeds from asset sales are not incorporated in Fitch’s rating case. Operating EBITDAR/Interest Paid + Rents (x) 6.0

5.0

4.0

3.0

2.0

1.0

0.0 2015 2016 2017 2018 2019F 2020F F – Forecast. Source: Fitch Solutions, Petroleo Brasileiro S.A. www.fitchratings.com | April 2019 19 Corporate Finance Mega Borrower LatAm

Petroleos Mexicanos (PEMEX) Issuer Default Rating BBB–/Negative

Derivation Summary Rating Horizona Adjusted Debt Balance USD109 billion a2017A–2020F average. Petroleos Mexicanos PEMEX’s linkage to the sovereign compares unfavorably with that of Petroleo Brasileiro S.A. (Petrobras, BB–/Stable), Ecopetrol S.A (BBB/Stable), Empresa Nacional del Petroleo (ENAP, A/Stable) and Petroleos del Peru (Petroperu, Fitch 2019 Forecast Cash Flow Waterfall: BBB+/Stable). All of PEMEX’s regional peers have strong linkage to their respective Petroleos Mexicanos (PEMEX) sovereigns as a result of strong government support. In Fitch’s view, all governments in the region, except for Mexico, implemented different measure to ensure the stand- (USD Mil.) alone credit profiles (SCPs) of their respective national oil and gas companies remain 2,000 viable in the long term. PEMEX’s ratings continue to reflect its close, albeit deteriorating, 0 linkage to the government of Mexico and the company’s fiscal importance to the sovereign, and strategic importance to the country. PEMEX’s ratings also reflect the (2,000) company’s competitive pre-tax cost structure, national and export-oriented profile, (4,000) sizable hydrocarbon reserves and its strong domestic market position. The ratings are constrained by PEMEX’s substantial tax burden, high leverage, significant unfunded (6,000) pension liabilities, large capital investment requirements, negative equity and exposure (8,000) to political interference risk. Fitch views PEMEX’s SCP as commensurate with a ‘CCC’ rating, which is five notches below Petrobras’ SCP of ‘BB–’ and nine notches below Ecopetrol’s SCP of ‘BBB’. These differences are primarily due to PEMEX’s weaker capital structure and increasing debt and leverage trajectory. CFFO – Cash flow from operations. M&A – Net mergers and acquisitions. Rating Sensitivities ND – Net debt. NE – Net equity. Cash – Readily available cash and equivalents. Source: Fitch Solutions, Petroleos Mexicanos (PEMEX). Positive Rating Action Sensitivities Fitch Leverage Forecast: Petroleos Mexicanos (PEMEX) • An upgrade of Mexico’s sovereign ratings. Total Adjusted Debt/Operating EBITDAR • An irrevocable guarantee from Mexico’s government sovereign of sustainably Total Adjusted Net Debt/Operating EBITDAR more than 75% of PEMEX’s debt. (x) 8.0 • A material capitalization of PEMEX, together with a business plan that results in neutral to positive FCF through the cycle, while implementing after a sustainable 7.0 upstream capex sufficient to replace 100% of reserve and stabilize production. 6.0 • Sustainable FFO-adjusted leverage below 5.0x. Negative Rating Action Sensitivities 5.0 • A downgrade of the sovereign’s rating that is not driven by the materialization of 4.0 contingent liabilities related to PEMEX. 3.0 • A sustained deterioration of PEMEX’s financial flexibility coupled with government inaction to support liquidity. This could result from continue 2.0 negative FCF and/or a material reduction of the company’s cash on hand, credit 2015 2016 2017 2018F 2019F 2020F facilities and/or restricted capital markets access. F – Forecast. Source: Fitch Solutions, Petroleos Mexicanos (PEMEX). • FFO-adjusted leverage materially above 8.0x and total debt-to-1P reserve significantly higher than USD15/barrels of oil equivalent. Fitch Coverage Forecast: Petroleos Mexicanos (PEMEX) • A continued deterioration of the company’s SCP to below the current ‘CCC’ FFO Interest Coverage assessment, which could result if the company fails to stabilize production, and Operating EBITDAR/Interest Paid + Rents continues with unsustainable reserves replacement ratios and negative FCF. (x) Fitch’s Key Assumptions Within Our Rating Case for the 7.0 Issuer Include: 6.0 • Average West Texas Intermediate (WTI) crude prices of USD57.5/barrel (bbl) in 5.0 2019 and USD55/bbl in the long term. 4.0 • Capex cuts implemented in 2017 continue for the medium term. 3.0 • Production declines by 5% over the next few years. 2.0 • PEMEX will receive necessary support from the government to ensure adequate 1.0 liquidity and debt service payments. 0.0 2015 2016 2017 2018F 2019F 2020F • Mexico lowers cash taxes by half per year over the next five years for 5% of (1.0) the company’s production, resulting in a decrease of approximately a 12% in government take from the existing tax scheme. F – Forecast. Source: Fitch Solutions, Petroleos Mexicanos (PEMEX). www.fitchratings.com | April 2019 20 Corporate Finance Mega Borrower APAC

Poly Developments and Holdings Group Co., Ltd. Issuer Default Rating BBB+/Stable

Derivation Summary Rating Horizona Adjusted Debt Balance USD40 billion a2017A–2020F average. Poly Developments and Holdings Group Co., Ltd.’s leverage is the highest among peers in the ‘BBB’ rating category, such as China Vanke Co., Ltd. (BBB+/Stable); China Overseas Land & Investment Limited (A–/Stable; SCP: BBB+/Stable); China Resources Land Ltd. Fitch 2019 Forecast Cash Flow Waterfall: (BBB+/Stable); and Country Garden Holdings Co. Ltd. (BBB–/Stable). However, Poly’s Poly Developments leverage relies much less on working capital, while peers take advantage of their strong bargaining power in the supply chain to obtain more favorable payment terms with their (USD Mil.) (USD Mil.) contractors and suppliers. Poly’s leverage after working capital adjustment is estimated 1,000 16,000 to be similar to that of Vanke, but much lower than that of Country Garden. 500 12,000 Poly’s margin of over 25% is comparable to those of China Overseas Land and China 0 Resources Land, and beats Country Garden’s less than 20%, as the latter adopts a (500) 8,000 higher churn model and a significant part of its sales are made up of lower-tier cities. (1,000) 4,000 The issuer’s ratings are supported by its good quality land bank that focuses on (1,500) Tier 1 and 2 cities and its large scale. Poly’s expanding nondevelopment business also (2,000) 0 provides income that boosts its debt service ability, with its EBITDA interest cover remaining at 0.3x–0.4x, higher than that of Country Garden. Poly’s ratings benefit from a one-notch uplift due to its moderate linkage with its parent, state-owned China Poly Group Corporation, in line with Fitch’s Parent and CFFO – Cash flow from operations. M&A – Net mergers and acquisitions. Subsidiary Rating Linkage criteria. ND – Net debt. NE – Net equity. Cash – Readily available cash and equivalents. Source: Fitch Solutions, Poly Developments and Holdings Group Co., Ltd. Rating Sensitivities Fitch Leverage Forecast: Poly Developments Positive Rating Action Sensitivities FFO-Adjusted Leverage • Fitch would consider positive rating action if the company was able to expand FFO-Adjusted Net Leverage its scale without compromising its financial profile, with net debt/adjusted net Total Adjusted Debt/Operating EBITDAR inventory ratio sustained below 40%. (x) Total Adjusted Net Debt/Operating EBITDAR 14 Negative Rating Action Sensitivities 12 • Weaker linkage with China Poly due to government policy changes or a change 10 in group strategy or policy. 8 SCP Sensitivities 6 • Any increase from Poly’s 2018 leverage level without a corresponding offset in 4 its payables to inventory ratio. 2 • EBITDA margin below 25% for a sustained period. 0 • Contracted sales/total debt below 1.5x for a sustained period. 2015 2016 2017 2018F 2019F 2020F Fitch’s Key Assumptions Within Our Rating Case for the F – Forecast. Issuer Include: Source: Fitch Solutions, Poly Developments and Holdings Group Co., Ltd. • Contracted sales by gross floor area (GFA) to increase by 20% in 2018 and 5% Fitch Coverage Forecast: Poly Developments annually from 2019, taking into account negative market sentiment in 2019. FFO Interest Coverage Operating EBITDAR/Interest Paid + Rents • Average selling price of contracted sales to grow 5% in 2019 and 2% beyond, (x) considering Poly’s focus on Tier 2 cities. 6.0 • Ratio of acquired GFA/contracted sales GFA at 1.3x in 2018 and 1.0x from 2019, 5.0 which will support a land bank life of four to five years (9M18: 1.2x). • Cash collection rate of 85% in 2018 and 88% in 2019, assuming the company faces 4.0 less cash collection pressure when sales growth slows (2017 and 9M18: 86%). 3.0

2.0

1.0

0.0 2015 2016 2017 2018F 2019F 2020F F – Forecast. Source: Fitch Solutions, Poly Developments and Holdings Group Co., Ltd. www.fitchratings.com | April 2019 21 Corporate Finance Mega Borrower APAC

Power Construction Corporation of China Issuer Default Rating A–/Stable

Derivation Summary Rating Horizona Adjusted Debt Balance USD57 billion a2017A–2020F average. Power Construction Corporation of China’s (PCCC) IDR, which is notched down twice from China’s Long-Term IDR, reflects its strong status as a GRE. Its strategic importance to the state in hydropower and hydraulic projects is comparable to that of other large Fitch 2019 Forecast Cash Flow Waterfall: SASAC-owned E&C enterprises that operate in sectors with only one or two dominant players, such as China Communications Construction Company Limited (A–/Stable) Power Construction Corp. in maritime infrastructure construction, China Railway Group Limited (A–/Stable) in (USD Mil.) railway E&C and China Energy Engineering Corporation Limited (A–/Stable) in thermal 10,000 power construction. All these entities are rated two notches below the sovereign using the top-down approach set out in Fitch’s Government-Related Entities Rating Criteria, 5,000 reflecting their strong linkages with the state. We assess PCCC’s SCP at ‘B–’. 0 Rating Sensitivities (5,000) (10,000) Positive Rating Action Sensitivities (15,000) • Positive rating action on the Chinese sovereign. • Strengthening linkage between PCCC and the Chinese sovereign. Negative Rating Action Sensitivities CFFO – Cash flow from operations. M&A – Net mergers and acquisitions. • Negative rating action on the Chinese sovereign. ND – Net debt. NE – Net equity. Cash – Readily available cash and equivalents. Source: Fitch Solutions, Power Construction Corporation of China. • Weakening linkage between PCCC and the Chinese sovereign. Fitch Leverage Forecast: Power Construction Corp. PCCC is rated two notches below China’s sovereign rating. For the FFO-Adjusted Leverage sovereign rating of China, the following sensitivities were outlined by FFO-Adjusted Net Leverage Fitch in its rating action commentary on Dec. 4, 2018: Total Adjusted Debt/Operating EBITDAR (x) Total Adjusted Net Debt/Operating EBITDAR Positive Rating Action Sensitivities 14 • An orderly resolution of the economywide debt problem and a reduction in 12 financial imbalances without a material negative impact on growth. 10 • A high degree of confidence that the economy’s pervasive contingent liabilities 8 are unlikely to pose a risk to the sovereign balance sheet, for example through tangible evidence that implicit government support for state-linked companies 6 will no longer be forthcoming. 4 • Widespread adoption of the Chinese yuan as a reserve currency. 2 Negative Rating Action Sensitivities 0 2015 2016 2017 2018F 2019F 2020F • Policy settings that lead to a further buildup of financial imbalances F – Forecast. and vulnerabilities. Source: Fitch Solutions, Power Construction Corporation of China. • An adverse macro shock that weakens medium-term growth prospects or Fitch Coverage Forecast: Power Construction Corp. public finances. FFO Interest Coverage • Sustained capital outflows sufficient to erode China’s external balance Operating EBITDAR/Interest Paid + Rents sheet strengths. (x) Fitch’s Key Assumptions Within Our Rating Case for the 2.5

Issuer Include: 2.0 • Revenue growth of 10%–12% in 2018–2021. • EBITDA margin of 8.4%–8.5% in 2018–2021. 1.5

• Capital intensity of 20%–21% in 2018–2021. 1.0 • No acquisitions in 2018–2021. 0.5

0.0 2015 2016 2017 2018F 2019F 2020F F – Forecast. Source: Fitch Solutions, Power Construction Corporation of China. www.fitchratings.com | April 2019 22 Corporate Finance Mega Borrower APAC

PT Perusahaan Listrik Negara (Persero) Issuer Default Rating BBB/Stable

Derivation Summary Rating Horizona Adjusted Debt Balance USD27 billion a Tenaga Nasional Berhad (A–/Stable) and Vietnam Electricity (EVN, BB/Stable), like 2017A–2020F average. PT Perusahaan Listrik Negara (PLN), are monopoly plays in their respective countries’ electricity transmission and distribution sectors, and own and operate the majority of the installed power-generation capacity. Tenaga’s and EVN’s IDRs are also equalized with that Fitch 2019 Forecast Cash Flow Waterfall: Persero of their respective sovereigns — Malaysia (A–/Stable) and Vietnam (BB/Stable) — per Fitch’s Government-Related Entities Rating Criteria. Power tariffs in Indonesia are lower (USD Mil.) than the average cost of electricity production. However, PLN operates under a time- 4,000 tested cost-plus framework. Any shortfall in PLN’s revenue from the sale of electricity is 3,000 compensated by the government via regular subsidies. EVN’s financial profile is similar 2,000 to that of PLN, but its ‘BB’ SCP is one notch lower to reflect EVN’s higher business risks, 1,000 including its use of hydropower, and currency and electricity demand risks. 0 (1,000) Rating Sensitivities (2,000) Positive Rating Action Sensitivities (3,000) (4,000) • Positive action on Indonesia’s sovereign rating, provided there is no significant weakening of the likelihood of state support. • Fitch would upgrade the company’s SCP if its business profile does not weaken due to regulatory change, including changes to the subsidy mechanism, while maintaining FFO-adjusted net leverage below 4.5x on a sustained basis. However, CFFO – Cash flow from operations. M&A – Net mergers and acquisitions. we consider this to be unlikely given the company’s high capex forecast. ND – Net debt. NE – Net equity. Cash – Readily available cash and equivalents. Source: Fitch Solutions, PT Perusahaan Listrik Negara (Persero). Negative Rating Action Sensitivities • Negative rating action on the sovereign. Fitch Leverage Forecast: Persero FFO-Adjusted Leverage • Significant weakening of the likelihood of support, including weaker FFO-Adjusted Net Leverage government links or lower government reliance on PLN for policy Total Adjusted Debt/Operating EBITDAR implementation. We see this as a remote prospect in the medium term. (x) Total Adjusted Net Debt/Operating EBITDAR • Fitch would lower the company’s SCP if its FFO-adjusted net leverage stays above 5.5x for a sustained period. 7.0 6.0 • Adverse changes to the subsidy framework, which worsen PLN’s under-recovery of generation costs. 5.0 For the sovereign rating of Indonesia, the following sensitivities were 4.0 outlined by Fitch in its Rating Action Commentary of Sept. 2, 2018: 3.0 2.0 Positive Rating Action Sensitivities 1.0 • Strengthening of external finances — for instance, by an increase in foreign- 0.0 exchange reserves, expansion of the manufacturing export base and lower 2015 2016 2017 2018F 2019F 2020F dependence on volatile portfolio flows. • Continued improvement of structural indicators, such as governance standards. F – Forecast. Source: Fitch Solutions, PT Perusahaan Listrik Negara (Persero). • An improvement in the government revenue ratio, for example, from better tax compliance and a broader tax base. Fitch Coverage Forecast: Persero Negative Rating Action Sensitivities FFO Interest Coverage Operating EBITDAR/Interest Paid + Rents • A sharp and sustained external shock to foreign and/or domestic investor (x) confidence, leading to a decline in foreign-exchange reserves. 4.0 • A material increase in the overall public debt burden, for example resulting from relaxation of the budget deficit ceiling. 3.5 3.0 • A weakening of the policy framework that could undermine macroeconomic stability. 2.5 Fitch’s Key Assumptions Within Our Rating Case for the 2.0 Issuer Include: 1.5 • Annual electricity volume growth of 7%. 1.0 • Continued appropriate reimbursements for selling electricity below cost. 0.5 0.0 • A gradual reduction of high-cost oil in the fuel mix used to generate electricity 2015 2016 2017 2018F 2019F 2020F and increase in lower-cost coal due to additional coal-fired generation capacity. F – Forecast. • Average annual capex of about IDR85 trillion over the next four years. Source: Fitch Solutions, PT Perusahaan Listrik Negara (Persero). www.fitchratings.com | April 2019 23 Corporate Finance Mega Borrower APAC

Reliance Industries Ltd Issuer Default Rating BBB–/Stable

Derivation Summary Rating Horizona Adjusted Debt Balance USD34 billion a2017A–2020F average. Reliance Industries Ltd’s ratings are supported by its strong business profile and robust asset quality. The company also has a strong market position in petrochemicals, with strong vertical integration and flexibility in feedstock. However, RIL’s digital business Fitch 2019 Forecast Cash Flow Waterfall: is evolving and is currently small; though it provides strong growth potential. Reliance Industries

Valero Energy Corporation (BBB/Stable) is the world’s largest independent refiner (USD Mil.) with 15 refineries, and it has a stronger financial profile and larger scale of operations 14,000 than RIL. However, RIL has superior refinery asset quality and downstream integration 12,000 in petrochemicals, which result in both entities’ SCPs being the same at ‘BBB’. PT 10,000 Pertamina (Persero)’s (BBB/Stable) ratings are equalized with that of the Indonesian 8,000 sovereign given the very strong linkages with and expectations of support from 6,000 the state. However, Pertamina’s SCP is assessed a notch lower than RIL at ‘BBB–’, 4,000 reflecting RIL’s superior refining asset quality and strong petrochemical operations, 2,000 despite Pertamina’s larger upstream integration. While Pertamina’s financial profile is 0 currently stronger than that of RIL, we expect Pertamina’s large investment plans to (2,000) result in its financial profile being marginally weaker than RIL over the medium term. Rating Sensitivities CFFO – Cash flow from operations. M&A – Net mergers and acquisitions. Positive Rating Action Sensitivities ND – Net debt. NE – Net equity. Cash – Readily available cash and equivalents. Long-Term Local Currency IDR Source: Fitch Solutions, Reliance Industries Ltd. • Net financial leverage (net adjusted debt to operating EBITDAR) below Fitch Leverage Forecast: Reliance Industries 1.5x on a sustained basis (fiscal 2017: 3.3x; fiscal 2018 [estimate]: 2.7x). FFO-Adjusted Leverage • Positive FCF generation. FFO-Adjusted Net Leverage • No material increase in the overall business risk profile of the company. Total Adjusted Debt/Operating EBITDAR (x) Total Adjusted Net Debt/Operating EBITDAR Long-Term Foreign Currency IDR 7.0 • India’s Country Ceiling is raised, provided RIL maintains its unconstrained 6.0 credit profile of ‘BBB’. 5.0 Negative Rating Action Sensitivities 4.0 Long-Term Local Currency IDR 3.0 • Net financial leverage sustained above 3.0x without meaningful change in 2.0 business profile. 1.0 Long-Term Foreign Currency IDR 0.0 2015 2016 2017 2018F 2019F 2020F • India’s Country Ceiling is lowered. F – Forecast. Fitch’s Key Assumptions Within Our Rating Case for the Source: Fitch Solutions, Reliance Industries Ltd. Issuer Include: • Moderation in industrywide refining margins in fiscal 2019, which will be Fitch Coverage Forecast: Reliance Industries partly offset by benefits from capex. FFO Interest Coverage • Rising petrochemical volumes and strong profitability in fiscal 2019; Operating EBITDAR/Interest Paid + Rents (x) profitability to moderate thereafter. 8.0 • Long-term crude oil prices (Brent) of USD57.5/barrel. 7.0 • Jio mobile subscribers to increase by around 70 million–75 million in fiscal 6.0 2019, and average revenue per user to decline modestly. 5.0 • Lower capex from fiscal 2020. 4.0 3.0 2.0 1.0 0.0 2015 2016 2017 2018F 2019F 2020F F – Forecast. Source: Fitch Solutions, Reliance Industries Ltd. www.fitchratings.com | April 2019 24 Corporate Finance Mega Borrower APAC

Shougang Group Co., Ltd. Issuer Default Rating A–/Stable

Derivation Summary Rating Horizona Adjusted Debt Balance USD45 billion a2017A–2020F average. Shougang Group Co., Ltd.’s rating of ‘A–’ is notched from Fitch’s internal assessment of the creditworthiness of the Beijing municipality. The gap is similar between the following GREs and their respective parents: China Railway Group Limited (A–/Stable); Fitch 2019 Forecast Cash Flow Waterfall: China National Chemical Corporation Limited (A–/Stable); China Energy Engineering Shougang Group Corporation Limited (A–/Stable); HBIS Group Co., Ltd. (BBB+/Stable); and Bright Food (Group) Co., Ltd. (A–/Stable). Shougang’s linkages to the municipality are stronger than (USD Mil.) those between other state-owned enterprises and their government parents, including 6,000 Kunming Iron & Steel Holding Co., Ltd. (BBB/Stable), due to Shougang’s critical role in 5,000 leading the two government projects. 4,000 Rating Sensitivities 3,000 2,000 Positive Rating Action Sensitivities 1,000 • Positive action on Beijing’s municipal rating, provided linkages between 0 Shougang and the Beijing municipal government remain intact. • A strengthening in the linkages between Shougang and the Beijing government. Negative Rating Action Sensitivities CFFO – Cash flow from operations. M&A – Net mergers and acquisitions. • Negative action on Beijing’s municipal rating, provided linkages between ND – Net debt. NE – Net equity. Cash – Readily available cash and equivalents. Shougang and the Beijing municipal government remain intact. Source: Fitch Solutions, Shougang Group Co., Ltd. • A weakening in the support from the Beijing government to Shougang. Fitch Leverage Forecast: Shougang Group Fitch’s Key Assumptions Within Our Rating Case for the FFO-Adjusted Leverage Issuer Include: FFO-Adjusted Net Leverage Total Adjusted Debt/Operating EBITDAR • Revenue to increase at 4.9% CAGR during 2018–2021. (x) Total Adjusted Net Debt/Operating EBITDAR • EBITDA margin to rise to 9.7% in 2018 and improve to 11.1% by 2021 50 (8.6% in 2017). 40 • Capex estimated at CNY17.9 billion in 2018 and CNY15.1 billion in 2019. 30

20

10

0 2015 2016 2017 2018F 2019F 2020F F – Forecast. Source: Fitch Solutions, Shougang Group Co., Ltd. Fitch Coverage Forecast: Shougang Group

FFO Interest Coverage Operating EBITDAR/Interest Paid + Rents (x) 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2015 2016 2017 2018F 2019F 2020F F – Forecast. Source: Fitch Solutions, Shougang Group Co., Ltd. www.fitchratings.com | April 2019 25 Corporate Finance Mega Borrower LatAm

Suzano Papel e Celulose S.A. Issuer Default Rating BBB–/Stable

Derivation Summary Rating Horizona Adjusted Debt Balance USD11 billion a2017A–2020F average. The merger of Suzano Papel e Celulose S.A. and Fibria Celulose S.A. resulted in the world’s leading producer of market pulp, with an annual pulp production capacity of 11 million tons in an industry of 62 million tons of market pulp. Suzano and Fibria have an estimated Fitch 2019 Forecast Cash Flow Waterfall: Suzano combined market share of about 18% in market pulp, 32% in hardwood pulp and 46% in the eucalyptus pulp subset of this category, per Fitch’s calculations. The second-largest (USD Mil.) producer of market pulp is Celulosa Arauco y Constitucion S.A. (Arauco, BBB/Stable), 4,000 followed by International Paper (not rated) and Empresas CMPC S.A. (CMPC, BBB/Stable). Suzano is also the leading producer of printing and writing paper and paperboard in Brazil. 2,000 0 Similar to Latin American pulp producers Arauco and CMPC, Suzano and Fibria’s pulp production cash costs are among the lowest in the world, ensuring its long-term (2,000) competitiveness. The combined company will have a significant size advantage in the (4,000) fragmented pulp market. It will have less geographic and product diversification than (6,000) its Chilean peers Arauco and CMPC, which are leaders in the wood products segment and tissue markets, respectively. (8,000) Suzano and Fibria’s ratings incorporate the expected increase in combined leverage, which positions the company with higher leverage than Arauco and CMPC. However, the investment-grade rating is supported by the expectation that net leverage will quickly decline in the next three years due to strong cash flow generation. CFFO – Cash flow from operations. M&A – Net mergers and acquisitions. Liquidity is historically strong for pulp producers and Suzano has strong access to ND – Net debt. NE – Net equity. Cash – Readily available cash and equivalents. debt and capital markets. Suzano and Fibria’s operating margins are higher than the Source: Fitch Solutions, Suzano Papel e Celulose S.A. Chilean companies that operate in lower-margin business segments, such as tissue, Fitch Leverage Forecast: Suzano packaging and boards. FFO-Adjusted Leverage Rating Sensitivities FFO-Adjusted Net Leverage Total Adjusted Debt/Operating EBITDAR Positive Rating Action Sensitivities (x) Total Adjusted Net Debt/Operating EBITDAR • A positive rating action is not expected in the medium term. However, higher 5.0 than expected cash generation in 2019 and 2020, allowing a consistent and 4.0 faster deleveraging, may positively affect the ratings. • Net leverage below 2.0x through the cycle. 3.0 Negative Rating Action Sensitivities 2.0

• An expectation that net leverage will remain above 3.0x in 2020. 1.0 • Significant and unexpected increase in refinancing risk. 0.0 • Sharp deterioration of market conditions with significant reduction in 2015 2016 2017 2018F 2019F 2020F pulp prices. F – Forecast. Fitch’s Key Assumptions Within Our Rating Case for the Source: Fitch Solutions, Suzano Papel e Celulose S.A. Issuer Include: Fitch Coverage Forecast: Suzano • Conclusion of the transaction in January 2019 for BRL27.7 billion, discounted by FFO Interest Coverage Fibria’s extraordinary dividends. Operating EBITDAR/Interest Paid + Rents • Dividends limited to minimum regulatory requirements. (x) 8.0 • Pulp and paper sales close to full capacity. 7.0 • Average hardwood pulp price delivered to Asia between USD800/ton and 6.0 USD825/ton in 2019 and 2020. 5.0 • FX rate of 3.8BRL/1.0USD. 4.0 3.0 2.0 1.0 0.0 2015 2016 2017 2018F 2019F 2020F F – Forecast. Source: Fitch Solutions, Suzano Papel e Celulose S.A. www.fitchratings.com | April 2019 26 Corporate Finance Mega Borrower LatAm

Vale S.A. Issuer Default Rating BBB–/Rating Watch Negative

Derivation Summary Rating Horizona Adjusted Debt Balance USD23 billion a2017A–2020F average. Vale S.A. is the leading low-cost iron ore producer globally, which positions the company well against its peers. Vale has similar business risk to Rio Tinto Ltd (A/Stable) in that both are highly exposed to a single commodity, iron ore. Rio Tinto benefits Fitch 2019 Forecast Cash Flow Waterfall: Vale from more geographical and slightly more commodity diversification compared with Vale. Similarly, BHP Group Ltd, (A/Stable) is more diversified geographically and (USD Mil.) by metal commodity product, as well as oil and gas, which further differentiates its 16,000 business risk profile from Vale and Rio Tinto. All three companies benefit from large- 14,000 scale operations and low cost positions. Rio Tinto and BHP’s iron ore businesses are 12,000 10,000 located closer to China, which further differentiate the ratings from Vale’s. 8,000 6,000 Rating Sensitivities 4,000 2,000 Positive Rating Action Sensitivities 0 (2,000) • The resolution of the issues related to fines, reparations, access to financing, (4,000) operational output and capex are not likely to be resolved during the next six months. This could result in a prolonged period for the Rating Watch Negative status of Vale’s ratings.

Negative Rating Action Sensitivities CFFO – Cash flow from operations. M&A – Net mergers and acquisitions. ND – Net debt. NE – Net equity. Cash – Readily available cash and equivalents. • Suspension of operations that use wet iron ore processing. Source: Fitch Solutions, Vale S.A. • The combination of readily available cash plus access to revolving credit facilities falling below USD5 billion. Fitch Leverage Forecast: Vale • Net debt/EBITDA above 3.0x on a sustained basis. FFO-Adjusted Leverage FFO-Adjusted Net Leverage • Total debt/EBITDA ratio above 3.5x on a sustained basis. Total Adjusted Debt/Operating EBITDAR (x) Fitch’s Key Assumptions Within Our Rating Case for the Total Adjusted Net Debt/Operating EBITDAR 8.0 Issuer Include:

• Prices for iron ore of USD80/ton in 2019 and 2020, reflecting evolving market 6.0 conditions following Vale’s tailings dam accident.

• Prices for copper and nickel following Fitch’s midcycle commodities price 4.0 assumptions. • Sales volumes of iron ore at 328 million tonnes in 2019 and 2020, in line with 2.0 Fitch’s scenario two analysis from our special report Spotlight: Vale Scenario Analysis (Assessing Vale’s Credit Profile in a New Reality). 0.0 • Nickel sales volumes of 260,000 tonnes–280,000 tonnes during 2019–2021. 2015 2016 2017 2018F 2019F 2020F • Copper sales volumes around 450,000 tonnes–470,000 tonnes during F – Forecast. Source: Fitch Solutions, Vale S.A. 2019–2021. • Coal EBITDA generation between USD400 million and USD600 million during Fitch Coverage Forecast: Vale 2019–2021. FFO Interest Coverage Operating EBITDAR/Interest Paid + Rents • Total capex of USD5.0 billion in 2019 and 2020. (x) • Fines, remediation costs and liabilities related to the tailings dam accident 16 estimated to be USD6.0 billion in 2019. The assumption is based off Fitch’s 14 special report: Spotlight: Vale Scenario Analysis (Assessing Vale’s Credit Profile in a New Reality). 12 • No dividends in the near term. 10 8 6 4 2 0 2015 2016 2017 2018F 2019F 2020F F – Forecast. Source: Fitch Solutions, Vale S.A. www.fitchratings.com | April 2019 27 Analyst Contacts

Mega Borrower Analyst Mega Borrower Analyst

America Movil Sul Ahmad, CFA Ecopetrol S.A. Lucas Aristizabal S.A.B. de C.V. Associate Director, Corporates Senior Director, Corporates +1 312 368-3348 +1 312 368-3260 [email protected] [email protected]

Braskem S.A. Debora Jalles HBIS Group Co., Ltd. Alan Jiang Director, Corporates Associate Director, Corporates +1 312 606-2338 +852 2263-9989 [email protected] [email protected]

China Communications Charles Zhang Petroleos Mexicanos Lucas Aristizabal Construction Company (PEMEX) Limited Associate Director, Corporates Senior Director, Corporates +852 2263-9994 +1 312 368-3260 [email protected] [email protected]

China Minmetals Alan Jiang Poly Developments and Edwin Fan Corporation Associate Director, Corporates Holdings Group Co., Ltd. Director, Corporates +852 2263-9989 +852 2263-9958 [email protected] [email protected]

China National Chemical Laura Zhai Power Construction Charles Zhang Corporation Limited Corporation of China Senior Director, Corporates Associate Director, Corporates +852 2263-9974 +852 2263-9994 [email protected] [email protected]

PT Perusahaan Listrik China Railway Group Andrew Shingfun Chan Rachna Jain Negara (Persero) Limited Director, Corporates Director, Corporates +852 2263-9559 +65 6796-7227 [email protected] [email protected]

CK Hutchison Holdings Reliance Industries Ltd Jeong Min Pak Muralidharan Ramakrishnan Limited Senior Director, Corporates Director, Corporates +822 3278-8360 +65 6796-7236 [email protected] [email protected]

Comision Federal de Velia Valdes Shougang Group Co., Ltd. Alan Jiang Electicidad (CFE) Associate Director, Corporates Associate Director, Corporates +52 81 8399-9100 +852 2263-9989 [email protected] [email protected]

Corporacion Nacional Suzano Papel e Phillip Wrenn Fernanda Rezende del Cobre de Chile Celulose S.A. (Codelco) Associate Director, Corporates Director, Corporates +1 312 368-2075 +55 11 4504-2600 [email protected] [email protected]

Vale S.A. Country Garden Holdings Adrian Cheng Phillip Wrenn Co. Ltd. Director, Corporates Associate Director, Corporates +852 2263-9968 +1 312 368-2075 [email protected] [email protected]

www.fitchratings.com | April 2019 28 Corporate Finance

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTPS://WWW.FITCHRATINGS.COM/SITE/DEFINITIONS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY’S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2019 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third-party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001. DC-125

www.fitchratings.com | April 2019 29