TRIS Rating Co., Ltd. has affirmed the company rating of Ratchaburi Electricity Generating Holding PLC (RATCH) at “AA” with “stable” outlook. The rating reflects the company’s leading position as the largest group of private power producers in Thailand, the sizable and reliable stream of dividends received from its power projects, the strong relationship with the Electricity Generating Authority of Thailand (EGAT). The rating also takes into consideration the company’s diversified portfolio of power plants and its investment plan to develop power and power-related projects in Thailand and other countries. Nevertheless, these strengths are constrained by the company’s increasing use of leverage and the risks arising from its overseas investments. The “stable” outlook reflects the expectation that RATCH will receive a reliable income stream from the good quality power projects in its portfolio, owing to the reliable power purchase agreements (PPAs) with EGAT. The company is expected to maintain its strong capital structure when pursuing its growth strategy and making future investments.
TRIS Rating reported that RATCH is a power holding company, established in 2000 to purchase the Ratchaburi power plant from EGAT. The company was listed on the Stock Exchange of Thailand (SET) in 2000. As of March 2012, EGAT continued to be RATCH’s major shareholder with a 45% stake. RATCH’s power portfolio consisted of 21 power projects with an aggregate power generating capacity of 11,262 megawatts (MW) of which 6,644 MW contributed to RATCH. Ten projects (5,314 MW) are in operation while 11 projects (1,330 MW) are under construction or development. For operating power capacity; 85% of generating capacity is connected with Thai’s power grid, 14% is in Australia and 1% is in Lao PDR. RATCH’s power generating capacity of 4,509 MW in Thailand represents 14% of total installed power generating capacity of the country, making the company the largest privately owned power generator in Thailand. All projects connected with Thai’s power grid hold PPAs with EGAT and the Provincial Electricity Authority (PEA).
TRIS Rating said, in 2011, RATCH diversified into the Australian power market after it acquired a 56.16% stake in Transfield Services Infrastructure Fund (TSIF) with the investment of AU$203 million. TSIF was delisted and renamed RATCH-Australia Corporation Limited (RAC). Currently, RATCH increased its interest to 68.1% of RAC and plans to hold an 80% stake in RAC within July 2012. RAC’s aggregate power generating capacity is 1,126 MW. By virtue of its 68.1% stake, RATCH’s share of RAC’s capacity was 766 MW as of March 2012. Although RAC’s revenue is mostly secured by the PPAs, RATCH continues to expose to some business risk due to the unfamiliar competitive environment in Australia.
During the last five years, RATCH’s earnings before interest, tax, depreciation, and amortization (EBITDA) averaged Bt10,000 million per year. RATCH’s reliance on dividend contribution from Ratchaburi Electricity Generating Co., Ltd. (RATCHGEN) has been decreasing from 100% to 85% of total dividend income. In 2011, RATCH received dividend income of Bt5,239 million from its power investments. RATCHGEN remained the major dividend contributor, providing 85% of RATCH’s dividend income. The remaining 15% was from dividend received from Tri Energy Co., Ltd. (TECO), Ratchaburi Power Co., Ltd. (RPCL), and Chubu Ratchaburi Electric Services Co., Ltd. (CRESCO).
RATCH’s financial profile is sound. Its capital structure weakened after the acquisition of RAC in 2011, as RAC has high leverage and debt funding for this transaction. The debt to capitalization ratio increased from 26.5% in 2010 to 44.3% in 2011. The company’s capital expenditures during 2012-2016 will be approximately Bt27,000 million. With the EBITDA of approximately Bt10,000 million per year, along with cash on hand and short-term investments totaling Bt13,710 million as of December 2011, the company has the ability to fund most of its capital expenditures with its operating cash flow. However, the company may need external financing for any big acquisitions or investments beyond existing portfolio, said TRIS Rating. — End
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