TRIS Rating Co., Ltd. has removed the CreditAlert with “negative” implication placed on the company rating of Rojana Industrial Park PLC (Rojana) since 14 October 2011 and at the same time has affirmed Rojana’s company rating at “A-” with “negative” outlook. The rating actions follow the aftermath of the massive flooding in Rojana Industrial Park in Ayudhya province during October till December 2011. The “negative” outlook reflects the uncertainty of future prospects of Rojana Industrial Estate after flooding and the uncertainty about future prospects of Rojana’s industrial park in Ayudhya province. The shift in attractiveness of the estate will affect land sales and consequently influence sales of power and utilities in the estate. The outlook could be revised to “stable” should Rojana’s power plants and utilities return to operation and generate reliable cash flows as normal. However, the rating could be downgraded if Rojana requires longer time to restore its operations and financial strengths.
TRIS Rating reported that Rojana is one of the leading industrial property developers in Thailand, established in 1988 by the Vinichbutr family and the Sumitomo Group. In addition to sales of industrial properties and utilities, the company also developed condominium projects both in Thailand and China. During 2007-2011, sales of industrial and residential properties accounted for 30% of Rojana’s total revenues while the remaining 70% was from the sales of electricity and utilities services.
TRIS Rating said, Rojana owns and operates two industrial parks in Ayudhya and Rayong provinces. During 2007-2011, land sales ranged from 400-650 rai per year. About 90%-95% of land sales came from the industrial park in Ayudhya. In addition to owning these two industrial estates, Rojana holds a 41% stake in Rojana Power Co., Ltd. (Rojana Power), located in the Ayudhya Industrial Park. Rojana Power has continuously increased its electricity generating capacity to support the growing customer base in the industrial park. Rojana’s electricity generating capacity increased gradually from 122 megawatts (MW) in 2004 to 267 MW currently. Of this amount, 90 MW is sold to the Electricity Generating Authority of Thailand (EGAT) under the Small Power Producer (SPP) scheme; the remainder is sold to Rojana’s industrial customers. During 2007-2010, electricity and water sales contributed 40% of Rojana’s total earnings before interest, tax, depreciation and amortization (EBITDA).
The massive flooding hit seven industrial estates in the central Thailand, including Rojana Industrial Park. Rojana Industrial Park was inundated from 10 October until 5 December 2011. Rojana’s 267 MW power plants, which is located in the estate, was shut down and declared force majeure to its counter parties. The power plants are currently under repair and are expected to return to normal operation by November 2012. Rojana’s property loss and flood-related expenses are estimated at Bt3,528 million, comprising property loss of power plants of Bt3,414 million and other losses of Bt114 million. As of December 2011, Rojana has received insurance compensation of Bt1,130 million, out of insurance claim of Bt2,562 million. Additionally, Rojana has submitted a claim for business interruption of about Bt800 million during the shutdown of its power plants.
The flooding has adversely affected Rojana’s performance. Rojana reported a net loss of Bt1,247 million in the fourth quarter of 2011 and Bt838 million for the total year 2011. The loss came because most operations were halted during the flooding. The net loss included the estimated damage and expenses due to the flooding, net of expected compensation from insurance, in the amount of Bt966 million. The net loss also incorporated a loss of Bt551 million from the sale of Rojana Distillery Co., Ltd., its loss-making subsidiary.
After the flood waters receded, sales activities in the previously-flooded industrial estates have slowed, and most investors prefer the non-flooded industrial estates. Rojana could sign a few land sales contracts for about 100 rai in Rojana Indurstrial Park. To increase investors’ confidence in Rojana Industrial Park, Rojana is developing a flood protection system. A 77 kilometers dyke around the Rojana Industrial Park is under construction by Italian-Thai Development PLC. The construction cost is about Bt2,030 million. Current funding for the construction comes from bridging loan from a bank. However, it will ultimately be replaced by government support. The government announced plans to subsidize two-thirds of the cost of constructing dykes around flood-affected industrial estates and will provide soft loans for the remaining.
To mitigate the effect of lower sales of Rojana Industrial Park, its main operating estate, Rojana recently announced it would acquire Pluagdaeng Industrial Park Co., Ltd. which located in Rayong province. The acquisition cost is about Bt433 million. Pluagdaeng currently has 528 rai of industrial land. Rojana plans to further diversify to other areas outside Ayudhya.
Rojana’s financial profile has weakened after the flooding. As of December 2011, total debt was Bt12,244 million and the total debt to capitalization ratio increased to 66.0%. In 2012-2014, Rojana has committed capital expenditures totaling Bt10,000 million, excluding the acquisition of new industrial estates. The capital expenditures comprise the refurbishment cost of the existing power plants, an expansion in power segment, and completion of the condominium project in China. The expansion in the power segment includes a 52 MW power plant to supply to industrial users, 112 MW plant operating under the SPP scheme, and 24 MW of new solar power project. These plants are scheduled to start commercial operation in mid 2013. The debt to capitalization ratio will further rise in the next few years. The liquidity and cash flow protection ratios are expected to be low during 2012-2013. However, the company’s liquidity is manageable, partly because it has a business interruption insurance claim of approximately Bt800 million and installments from land sales in previous years. Rojana also plans to divest its hotel property in China. In addition, the company has an alternative source of funding via the gradual exercise of the new 386.4 million units of warrants to be expired within 2015. The exercise price is Bt4 per share compared with the current market price of Bt7.6 as of 24 April 2012. All warrants, if exercised, will provide about Bt1,600 million in new equity, said TRIS Rating. — End
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