graphite electrodes dec 2013

GRAPHITE ELECTRODESOn an upswing

GRAPHITE ELECTRODESOn an upswing

Dec 2013

Rajesh Zawar+91 22 6626 6726

[email protected]

India Equities

1

Anand Rathi Research

2

Graphite India & HEG to leverage growth

Western graphite electrode (GE) capacity curtailments driving supply rationalization

Raw-material access and scale leading to polarisation towards 10-12 global players

Supply continuity for global steel manufacturers favours stable and long-term GE players

Steel capacity utilisation upswing will create pricing power in GE industry

Graphite India and HEG have attained global scale and competitiveness to leverage the upswing – initiate coverage with BUY

Protectionism through anti-dumping duty, the biggest risk

GE industry peers

Source: Industry, company annual reportsa

Graphite electrode (GE) demand supply scenario

Source: Graftech International annual reports


3

Index

Demand improvement gaining visibility 4

Long-term growth drivers intact 5

GE manufacturing process 6

Entry barriers create an edge 7

Needle coke manufacturing process 8

Indian players moving into the global league 9

Graphite India – Stability at the best 10

HEG – Poised for growth 14

Steel utilization levels looking up

Steel capacity utilization improving in developed markets – better dynamics for EAF

Feedstock (scrap, DRI or HBI) offer greater operational flexibility to EAF steel producers

Environmental advantages: fewer carbon emissions and recycling gaining wider acceptance


4

Demand improvement gaining visibility

No known alternative to GE

Graphite electrodes (GE) utilised in steel production

through the electric arc furnace (EAF) route

Efficient/flexible – swing capacity to manage demand

volatility – US market, best example

~1.7kg to ~4kg of GE consumed per tonne of steel

produced; inversely proportional to the EAF current

Growing importance of the EAF route in global steel production

Source: IISI, AnandRathi Research

Graphite electrode use in EAF

Source: Industry reports

EAF capacity to increase ~25% over five years

Steel production growth in the last decade driven by

BOF technology for scale and efficiency in China;

environmental empathy creating strong driver for

manufacturing-process reorientation

Life-cycle approach to the business plans of large steel

players (>10m tonnes pa) necessitating EAF facilities to

balance demand volatility and cost effectiveness


5

Long-term growth drivers intact

DRI - new frontier for feedstock

Coking coal replacement necessitating DRI (Direct

Reduced Iron) usage instead of scrap

Iron-reduction technologies have successfully

demonstrated large-scale efficient production

New energy sources (shale gas, natural gas) favouring

DRI production

GE Regional Demand in 2012 - Market size of ~1.9m tpa (US$5.5 billion)

Source: Graftech

EAF Steel-making process

Source: Industry


6

GE manufacturing process

Source: Industry

GE manufacturing process

Needle coke is crushed and mixed with binder (pitch coke)

Baked and machined for finishing into GE

Raw-material access is restricted

Only 11 global manufacturers of needle coke (premium

grade pet coke) as a by-product of the delayed coking of

crude oil by refineries

Needle coke, the highest cost component in GE, with

sourcing on annual contracts

~105m tpa pet coke produced; ~250m tpa can be

produced as demand improves


7

Entry barriers create an edge

Every client is unique

GE manufacturers require strong understanding of client

EAF operations

Extensive GE product & process knowledge are

required as EAF technology is changing

~60% demand served by 8-10 global-scale GE players

as capital investment creates customised products for

clients

GE production cost structure

Source: Graftech

GE product technology and application

Source: Energoprom presentation Aug 2013

Electro GradeEAF Transformer

capacity (MVA) Electrode current

load (kA)

Regular Power (RP) 4 to 15 up to 45

High Power (HP) up to 45 up to 60

Super High Power (SHP)

up to 100 up to 75

Ultra High Power (UHP)

up to 140 up to 85


8

Needle coke manufacturing process

Needle coke production process

Source: Industry reports

World crude oil production

Source: US EIA

Different types of coke

Petroleum coke

Pitch coke

Metallurgical coke

Carbon Black

Needle coke

Needle coke manufacturers

Phillips 66

Petrocokes Japan (Japan)

Mitsubishi Chemical Company

Baosteel Group (China)

Cchem Co. (Japan),

Indian Oil Company

Hongte Chemical Industry (Group) Co. (China)

JX Holdings Inc. (Japan)

Petrochina International Jinzhou Co. (China)

Sinosteel Anshan (China)


9

Indian players moving into the global league

Scale in top league creates an edge

Steel demand in Asia (>50% of global demand) has

created a huge GE market and scale for Indian players

Investment capability in technology is driving efficient

product mix through value addition

Focus on quality improvement has created strong client

relationships over 30 countries

EBIT margins

Source: Companies

Global GE players capacity

Source: Company presentations, Industry

Cost competitiveness, the chief factor

Employee and captive power costs provide competitive

edge

Cost competitiveness saw capacity utilisation above

global counterparts in the downturn

Scale driving operating leverage; so margins will reverse

on the upswing


10

Peer comparison

Valuations

Source: Bloomerg, Anand Rathi Research

Ticker Name Mkt Cap (US$m) EV/EBITDA FY14/CY13 EV/EBITDA FY15/CY14 PE FY14 PE FY15

GRIL IN Equity GRAPHITE INDIA 252 6.1 4.8 8.0 6.6

HEG IN Equity HEG 122 7.9 6.4 9.0 6.7

SGL GR Equity SGL CARBON 2,814 22.7 13.5 NA 66.3

GTI US Equity GRAFTECH INTERNATIONAL 1,549 14.7 11.8 98.8 34.7

Stock performance

Source: Bloomberg

Ticker Name 3M price chg 6M price chg 1Y price chg 3Y price chg 5Y price chg

GRIL IN Equity GRAPHITE INDIA 6.4 9.6 (1.3) (5.0) 23.3

HEG IN Equity HEG 32.6 53.0 25.2 (16.6) 8.8

SGL GR Equity SGL CARBON 7.5 8.7 (3.7) 3.0 5.2

GTI US Equity GRAFTECH INTERNATIONAL 22.5 20.5 (17.6) (7.7) 16.2

Operating metrics

Source: Bloomberg

Ticker Name Revenue (US$m) EBITDA (US$m) EBITDA Margin ROA (%) ROE (%)

GRIL IN Equity GRAPHITE INDIA 358.4 50.5 14.1 4.7 8.0

HEG IN Equity HEG 298.4 54.1 18.1 3.9 11.2

SGL GR Equity SGL CARBON 1,248.3 238.1 19.1 5.3 8.7

GTI US Equity GRAFTECH INTERNATIONAL 2,197.7 257.8 11.7 0.3 0.7


11

■ Scale in global league with 98,000 tonnes per annum production capacity - ~65%

production exported to 30 countries – strong product knowledge built since 1960.

■ Strong operating margins driven by operational efficiency, productivity, technology, and

access to low-cost sources of power.

■ Integrated backwards and produces Calcined Petroleum Coke - key raw material in

electrode manufacturing, Strong cash-flow generation, healthy balance sheet, high

dividend yield – added attractiveness

■ Initiate Buy with target price of `108 based on 6x EV/EBITDA on FY15e basis

Key data GRIL IN / GRPH.BO

52-week high / low `91 / `57

Sensex / Nifty 21101 / 6284

3-m average volume US$0.1m

Market cap `15bn / US$0.2bn

Shares outstanding 195m

Graphite India: Stability at the best

Financials (YE Mar) FY12 FY13 FY14e FY15e FY16e

Revenues (`m) 16,708 17,649 16,993 19,051 21,919 EBITDA (`m) 3,112 2,789 2,887 3,434 4,491

EBITDA margin (%) 18.6 15.8 17.0 18.0 20.5 PAT (`m) 2,379 1,631 1,933 2,265 2,922 EPS (`) 12.2 8.3 9.9 11.6 15.0 EPS growth (%) 38.1 (31.4) 18.5 17.2 29.0 PE (x) 6.3 9.2 7.8 6.6 5.1 P/BV (x) 1.0 0.9 0.8 0.8 0.7 EV/EBITDA (x) 5.9 6.6 5.2 4.2 3.1 ROACE (%) 16.0 10.2 11.3 12.3 14.5 Source: Company, Anand Rathi Research

Rating: Buy

Target Price: `108

Share Price: `77

Shareholding (%) Sep'13 Jun'13 Mar'13

Promoters 63.9 63.2 62.8

Foreign Institutions 15.2 15.4 15.9

Domestic Institutions 4.8 5.0 4.9

Public 16.2 16.4 16.4


12

■ Starting with electrodes in the 1960s, Graphite India further extended into specialty carbon, graphite applications, heat exchanger equipment, glass-reinforced pipes (GRP)

■ It has shown strong financial performance with a double-digit revenue CAGR over the past six years despite the global slowdown

■ Group capacity of 98,000 tonnes per annum with four plants -UHP accounts for 90% and regular power (RP) accounts for the balance

■ Diversified customer portfolio including global steel majors, diversified across geographies

Management Team

■ Mr. K. K. Bangur, Chairman

■ Mr. M. B. Gadgil, Executive Director

■ Mr. K. C. Parakh, Senior Vice-President (Finance)

■ Mr. S. Chaudhary, Senior Vice-President (Corporate)

■ Mr. B. Shiva, Senior Vice President (Legal) & Company Secretary

■ Mr. A. K. Dutta, Senior Vice-President (Marketing)

Plant Location Capacity (tonnes)

Durgapur (India) 54,000

Bangalore (India) 13,000

Nasik (India) 13,000

Nurnberg (Germany) 18,000

Total 98,000

Graphite India: Background

Relative price performance

Source: Bloomberg


13

Graphite India: Operational model

Source: Company, Anand Rathi Research

Operational model

Year end: Mar FY08 FY09 FY10 FY11 FY12 FY13 FY14e FY15e FY16eCapacity (tons) 55,000 55,000 55,000 55,000 80,000 80,000 80,000 80,000 80,000 Chg YoY (%) 0.0 0.0 0.0 0.0 45.5 0.0 0.0 0.0 0.0Capacity utilisation levels (%) 132.5 120.4 73.7 102.9 71.6 71.1 68.0 75.0 85.0 Chg YoY (%) 10.0 (9.1) (38.8) 39.6 (30.5) (0.7) (4.3) 10.3 13.3 Realization (US$/ton) 3,240 3,233 4,680 3,698 4,861 4,804 4,083 4,246 4,416 Chg YoY (%) 30.7 (0.2) 44.7 (21.0) 31.4 (1.2) (15.0) 4.0 4.0 Expenses (US$/ton) 2,505 2,372 2,928 2,813 3,848 3,768 3,241 3,338 3,438 Chg YoY (%) 47.9 (5.3) 23.4 (3.9) 36.8 (2.1) (14.0) 3.0 3.0 EBITDA (US$/ton) 735 861 1,752 885 1,013 1,035 842 909 978 Chg YoY (%) (6.4) 17.2 103.5 (49.5) 14.4 2.2 (18.6) 7.8 7.7

Revenue and EBITDA margin


RoAE and RoACE



14

Fig 1 – Income statement (`m)Year-end: Mar FY12 FY13 FY14e FY15e FY16eNet revenues 16,708 17,649 16,993 19,051 21,919 Revenue growth (%) 36.3 5.6 (3.7) 12.1 15.1 - Op. expenses 13,596 14,860 14,106 15,617 17,428 EBIDTA 3,112 2,789 2,887 3,434 4,491 EBITDA margin (%) 18.6 15.8 17.0 18.0 20.5 - Interest expenses 144 221 284 259 209 - Depreciation 404 500 550 576 603 + Other income 346 264 264 264 264 - Tax 828 700 952 1,116 1,439

Effective tax rate (%) 34.8 42.9 49.3 49.3 49.3 Reported PAT 2,379 1,631 1,933 2,265 2,922 +/- Extraordinary items 296 - - - -+/- Minority interest - - - - -Adjusted PAT 2,379 1,631 1,933 2,265 2,922 Adj. FDEPS (`/sh) 12.2 8.3 9.9 11.6 15.0 Adj. FDEPS growth (%) 38.1 (31.4) 18.5 17.2 29.0 Source: Company, Anand Rathi Research

Fig 2 – Balance sheet (`m)Year-end: Mar FY12 FY13 FY14e FY15e FY16eShare capital 391 391 391 391 391 Reserves & surplus 15,228 16,059 17,314 18,784 20,680 Net worth 15,619 16,450 17,705 19,174 21,070 Minority interest - - - - -Total debt 4,617 5,676 5,676 4,676 3,676 Def. tax liab. (net) 708 950 950 950 950 Capital employed 20,945 23,077 24,331 24,801 25,697 Net fixed assets 6,700 6,626 6,676 6,700 6,697 Investments 2,051 1,093 1,093 1,093 1,093 - of which, Liquid - -

Net working capital 12,850 14,026 10,752 11,754 13,070 Cash and bank balance 1,395 2,424 5,810 5,254 4,837 Capital deployed 20,945 23,077 24,331 24,801 25,697 Net debt 3,222 3,252 (134) (578) (1,162)WC days 281 290 231 225 218 Book value (`/sh) 64.0 78.3 97.4 118.7 119.7 Source: Company, Anand Rathi Research

Fig 3 – Cash-flow statement (`m)Year-end: Mar FY12 FY13 FY14e FY15e FY16ePAT 2,379 1,631 1,933 2,265 2,922 +Non-cash items 404 500 550 576 603 Cash profit 2,783 2,131 2,483 2,841 3,524 - Incr./(Decr.) in WC 2,101 2,349 (2,181) 1,002 1,316 + Net finance exp 168 253 548 523 473 - Misc 564 (69) 528 528 528 Operating cash-flow 286 104 4,684 1,835 2,153 -Capex 1,321 408 600 600 600 Free cash-flow (1,035) (305) 4,084 1,235 1,553 -Dividend and interest 947 1,024 962 1,054 1,234 + Equity raised - - - - -+ Debt raised 1,752 1,241 - (1,000) (1,000)-Investments (4) 3 - - -+ Other inc and misc (33) (41) (264) (264) (264)Net cash-flow (193) (49) 3,386 (555) (417)Source: Company, Anand Rathi Research

Fig 4 – Ratio analysis @ `77Year-end: Mar FY12 FY13 FY14e FY15e FY16eP/E (x) 6.3 9.2 7.8 6.6 5.1 P/B (x) 1.0 0.9 0.8 0.8 0.7 P/CF (x) 5.4 7.1 6.1 5.3 4.3 EV/Sales (x) 1.1 1.0 0.9 0.8 0.6 EV/EBITDA (x) 5.9 6.6 5.2 4.2 3.1 Dividend yield (%) 4.5 4.5 3.9 4.5 5.8 Dividend payout (%) 28.7 41.9 30.0 30.0 30.0 RoAE (%) 16.0 10.2 11.3 12.3 14.5 RoACE (%) 16.0 11.6 11.0 12.7 16.4 Debt/Equity (x) 0.3 0.3 0.3 0.2 0.2 EBIT/Interest (x) 18.8 10.3 8.2 11.0 18.6 EBITDA growth (%) 10.1 (10.4) 3.5 18.9 30.8 EBITDA margin (%) 18.6 15.8 17.0 18.0 20.5 EBIT margin (%) 16.2 13.0 13.8 15.0 17.7 PAT margin (%) 14.2 9.2 11.4 11.9 13.3 Source: Company, Anand Rathi Research

Graphite India: Financials


15

■ Scale in global league with 80,000 tonnes per annum production capacity- largest integrated facility in the world with captive power generation

■ ~75% of electrode production is exported to 25 countries – strong customer relationships and product knowledge to drive higher utilisation levels from 75% to 85% in three years.

■ Operating margins to improve ~300bps from FY14 to FY16, still below past 10 years’average of 21.9%, driven by utilisation and realisation

■ Strong cash-flow generation, healthy balance sheet, high dividend yield – added attractiveness

■ Initiate Buy with target price of `235 based on 7x EV/EBITDA on FY15e basis

Key data HEG IN / HEG.BO52-week high / low `263 / `140

Sensex / Nifty 21101 / 6284

3-m average volume US$0.1m

Market cap `7bn / US$0.1bn

Shares outstanding 40m

HEG: Poised for growth

Financials (YE Mar) FY12 FY13 FY14e FY15e FY16e

Revenues (`m) 14,246 16,226 15,403 16,981 18,719 EBITDA (`m) 2,418 2,931 2,351 2,846 3,411

EBITDA margin (%) 17.0 18.1 15.3 16.8 18.2 PAT (`m) 623 1,058 795 1,067 1,339 EPS (`) 15.6 26.5 19.9 26.7 33.5 EPS growth (%) (48.1) 69.8 (24.8) 34.2 25.5 PE (x) 12.1 7.1 9.4 7.0 5.6 P/BV (x) 1.0 0.9 0.8 0.8 0.7 EV/EBITDA (x) 7.8 6.7 8.0 6.6 5.2 ROACE (%) 10.8 11.8 8.2 9.9 12.3 Source:Company, Anand Rathi Research

Shareholding (%) Sep'13 Jun'13 Mar'13

Promoters 58.3 58.3 58.3

Foreign Institutions 0.9 0.9 0.9

Domestic Institutions 10.7 10.7 10.7

Public 30.1 30.1 30.1

Rating: Buy

Target Price: `235

Share Price: `188


16

■ Established in 1977, HEG is the premier company of the `50bn LNJ Bhilwara group, a diversified conglomerate with business interests in power, graphite electrodes, textiles and IT services

■ Largest single-location, integrated graphite electrode plants in the world, processing sophisticated UHP (ultra-high power) electrodes

■ Diversified customer portfolio including ArcelorMittal, SAIL, Tata Steel, Jindal Group, Nucor, POSCO, etc.

■ Plant located at Mandideep, Madhya Pradesh - captive power generation capacity of ~77 MW.

Management Team

■ Mr. L. N. Jhunjhunwala, Chairman-Emeritus

■ Mr. Ravi Jhunjhunwala, Chairman & Managing Director

■ Mr. Shekhar Agarwal, Vice-Chairman

■ Mr. K. Vaidyanathan, Chief Operating Officer

■ Mr. Raju Rustogi, Chief Financial Officer

■ Mr. Ashish Sabharwal, Company Secretary

HEG : Background

Plant Location Capacity

GE plant, Mandideep 80,000 tonnes

Thermal Power, Mandideep 64MW

Hydel Power, Hoshangabad 13.5MW

Relative price performance

Source: Bloomberg


17

HEG : Operational model


Operational model

Year end: Mar FY08 FY09 FY10 FY11 FY12 FY13 FY14e FY15e FY16eCapacity (tons) 52,000 60,000 66,000 66,000 80,000 80,000 80,000 80,000 80,000 Chg YoY (%) 0.0 15.4 10.0 0.0 21.2 0.0 0.0 0.0 0.0Capacity utilisation levels (%) 99.7 83.7 66.4 80.0 70.0 75.0 75.0 79.5 84.3 Chg YoY (%) 20.1 (16.1) (20.6) 20.4 (12.5) 7.1 - 6.0 6.0 Realization (US$/ton) 4,531 4,471 5,442 4,628 5,306 4,969 4,075 4,238 4,407 Chg YoY (%) 8.2 (1.3) 21.7 (14.9) 14.6 (6.3) (18.0) 4.0 4.0 Expenses (US$/ton) 3,227 3,356 3,817 3,714 4,405 4,072 3,453 3,528 3,604 Chg YoY (%) (2.2) 4.0 13.7 (2.7) 18.6 (7.6) (15.2) 2.2 2.2 EBITDA (US$/ton) 1,304 1,116 1,625 914 901 898 622 710 803 Chg YoY (%) 46.8 (14.5) 45.6 (43.7) (1.5) (0.3) (30.7) 14.2 13.1

Revenue and EBITDA margin


RoAE and RoACE



18

Fig 1 – Income statement (`m)Year-end: Mar FY12 FY13 FY14e FY15e FY16e

Revenues 14,246 16,226 15,403 16,981 18,719 Revenue growth (%) 27.9 13.9 (5.1) 10.2 10.2 - Op. expenses 11,828 13,295 13,052 14,135 15,308 EBIDTA 2,418 2,931 2,351 2,846 3,411 EBITDA margin (%) 17.0 18.1 15.3 16.8 18.2 - Interest expenses 407 636 790 764 712 - Depreciation 579 626 703 795 836 + Other income 168 136 136 136 136 - Tax 48 195 199 356 660

Effective tax rate (%) 7.2 15.5 20.0 25.0 33.0 PAT 623 1,058 795 1,067 1,339 +/- Extraordinary items (928) (552) - - -+/- Minority interest - - - - -Attributable PAT 623 1,058 795 1,067 1,339 Adj. FDEPS (`/share) 15.6 26.5 19.9 26.7 33.5 Adj. FDEPS growth (%) (48.1) 69.8 (24.8) 34.2 25.5 Source: Company, Anand Rathi Research

Fig 2 – Balance sheet (`m)Year-end: Mar FY12 FY13 FY14e FY15e FY16e

Share capital 400 400 400 400 400 Reserves & surplus 7,223 8,233 8,721 9,377 10,199 Net worth 7,622 8,633 9,121 9,776 10,598 Minority interest - - - - -Total debt 11,434 12,151 12,151 11,351 10,551 Def. tax liab. (net) 787 814 814 814 814 Capital employed 19,843 21,598 22,086 21,941 21,963 Net fixed assets 8,737 9,325 9,422 9,427 9,390 Investments 687 705 705 705 705 - of which, Liquid - - - - -

Net working capital 10,926 12,127 11,861 12,326 12,375 Cash and bank balance 180 146 803 188 198 Capital deployed 19,843 21,598 22,086 21,941 21,963 Net debt 11,254 12,005 11,348 11,163 10,353 WC days 279.9 272.8 281.1 265.0 241.3 Book value (`/sh) 190.8 216.0 228.3 244.7 265.2 Source: Company, Anand Rathi Research

Fig 3 – Cash-flow statement (`m)Year-end: Mar FY12 FY13 FY14e FY15e FY16e

PBT 671 1,253 994 1,423 1,999 Non cash items 579 626 703 795 836 Interest expense 407 636 790 764 712 Non operating items (12) (31) (136) (136) (136)Chg in WC (1,327) (1,137) 266 (465) (48)Tax paid (48) (195) (199) (356) (660)Operating cash-flow 271 1,152 2,418 2,025 2,703

Capex (2,030) (1,494) (800) (800) (800)Investments 381 46 136 136 136 CF from investing (1,649) (1,448) (664) (664) (664)Chg in share capital (675) - - - -Chg in debt 2,979 1,272 - (800) (800)Dividend, int and others (863) (1,010) (1,097) (1,176) (1,229)CF from financing activities 1,440 262 (1,097) (1,976) (2,029)Net cash-flow (885) (34) 657 (615) 10


Fig 4 – Ratio analysis @ `188Year-end: Mar FY12 FY13 FY14e FY15e FY16eP/E (x) 12.1 7.1 9.4 7.0 5.6 P/B (x) 1.0 0.9 0.8 0.8 0.7 P/CF (x) 6.2 4.5 5.0 4.0 3.5 EV/Sales (x) 1.3 1.2 1.2 1.1 1.0 EV/EBITDA (x) 7.8 6.7 8.0 6.6 5.2 Dividend yield (%) 2.7 4.3 3.5 4.7 5.9 Dividend payout (%) 32.1 30.2 33.0 33.0 33.0 RoAE (%) 7.9 13.0 9.0 11.3 13.1 RoACE (%) 10.8 11.8 8.2 9.9 12.3 Debt/Equity (x) 1.5 1.4 1.3 1.2 1.0 EBIT/Interest (x) 4.5 3.6 2.1 2.7 3.6 EBITDA growth (%) 9.9 21.2 (19.8) 21.0 19.9 EBITDA margin (%) 17.0 18.1 15.3 16.8 18.2 EBIT margin (%) 12.9 14.2 10.7 12.1 13.8 PAT margin (%) 4.4 6.5 5.2 6.3 7.2 Source: Company, Anand Rathi Research

HEG : Financials


Appendix

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The views expressed in this Research Report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. The research analysts are bound by stringent internal regulations and also legal and statutory requirements of the Securities and Exchange Board of India (hereinafter “SEBI”) and the analysts’ compensation are completely delinked from all the other companies and/or entities of Anand Rathi, and have no bearing whatsoever on any recommendation that they have given in the Research Report.The research analysts, strategists, or research associates principally responsible for the preparation of Anand Rathi Research have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment banking revenues.

Anand Rathi Ratings Definitions

Analysts’ ratings and the corresponding expected returns take into account our definitions of Large Caps (>US$1bn) and Mid/Small Caps (<US$1bn) as described in the Ratings Table below:

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