TRIS Rating Co., Ltd. has affirmed the company and guaranteed debenture ratings of Glow Energy PLC (GLOW) at “A” with “stable” outlook. The ratings reflect the company’s proven track record in the power generating industry in Thailand, reliable cash flows from long-term Power Purchase Agreements (PPA) with the Electricity Generating Authority of Thailand (EGAT), and long-term contracts with a diverse group of industrial customers. These strengths are partially offset by customer concentration risk, as most of GLOW’s customers are in the petrochemical industry in the Map Ta Phut area. The “stable” outlook reflects the expectation that GLOW will receive reliable cash flows from its long-term power sales contracts with EGAT and its industrial customers. The commissioning of its power projects under development will gradually increase the cash flow stream for GLOW in the coming years.
TRIS Rating reported that GLOW was established in 1993 as a Small Power Producer (SPP) in the Map Ta Phut Industrial Estate. Its business scope has expanded to include the cogeneration and independent power producer (IPP) projects both in Thailand and neighboring countries. GDF SUEZ Group remains the major shareholder of GLOW. GDF SUEZ is one of the world’s leading energy providers, supplying energy throughout the world, but primarily in Europe. GDF SUEZ also operates gas transmission and distribution networks and supplies other energy-related products and services. Currently, GLOW is the leading private power producer in Thailand. The cogeneration segment generated about 70% of GLOW’s sales and earnings before interest, tax, depreciation, and amortization (EBITDA) in 2011. As of March 2012, its power generating capacity totaled 2,416 megawatts (MW), consisting of 865 MW in IPP plants and a total of 1,551 MW in cogeneration units. One of GLOW’s IPP plants is a gas fired plant located in Chonburi province, while the other IPP plant is a hydro power plant located in Lao PDR. GLOW’s cogeneration segment, which is located in Map Ta Phut Industrial Estate and Eastern Seaboard Industrial Estate in Rayong province, mainly caters to petrochemical plants which require highly stable supplies of utilities. However, this structure carries concentration risk because most of the customers are in the petrochemical industry and are located in the Map Ta Phut area. Only around 2% of the total generating capacity serves automotive industries in Pluag Deang, Rayong.
TRIS Rating said, out of GLOW’s total capacity of 2,416 MW of electricity and 1,206 tonnes per hour of steam, 1,593 MW has been contracted to EGAT under several PPAs spanning 21-25 years. The PPAs have remaining terms of five to 25 years. The remaining capacity of electricity and steam, together with treated water, are supplied to industrial customers. These long-term commitments provide GLOW with reliable sources of cash flow. During the past three years, sales to EGAT contributed 55%-60% of total revenue while sales to industrial customers accounted for the remainder.
The volume of electricity sold to industrial customers continued to rise in 2011. The amount of electricity sold to industrial customers grew 9.0% year-on-year (y-o-y) to 4,249 gigawatt hours (GWh) in 2011, due to the increase of customer demand and the consolidation with Glow SPP 11 Co., Ltd. and SPP 13 Co., Ltd. since August 2011. Demand for steam also increased significantly in 2011, rising by 15.8% by volume. GLOW’s total revenue rose 13% y-o-y to Bt40,359 million despite the fact that the gas-fired IPP power plant generates less electricity, the result of an extended shut-down order from EGAT. However, GLOW’s operating margin before depreciation and amortization declined to 23.0% in 2011 from 25.0% in 2010. The lower margin was due to surging fuel costs and moderate utilization of GLOW’s expansion capacity. As a result, EBITDA for 2011 was Bt9,477 million, up by only 4.3% from Bt9,084 million in 2010. The operating margin further declined to 19.3% in the first quarter of 2012 from 23.04% in 2011 due to the delay in fuel adjustment (Ft) charge increase. GLOW’s EBITDA declined by 4.5% compared with the same period of last year to Bt2,176 million in the first quarter of 2012. However, net profit rose because unrealized foreign exchange gains and the delay liquidated damage (DLD), charged to the contractor of GHECO-One Co., Ltd. (GHECO-One), GLOW’s 660 MW coal fired plant. GLOW recorded DLD totaling to Bt1,046 million in the first quarter of 2012, on top of Bt546 million booked in the fourth quarter of 2011. GLOW’s total debt to capitalization ratio hovered around 64% at the end of March 2012 because of continued project investments as planned. Looking forward, EBITDA is expected to increase in the second half of 2012. GLOW’s profitability is expected to improve as a result of the government’s approval of a Bt0.30 per KWh increase in the Ft charge effective in June to August 2012 while fuel costs are projected to soften as well as oil prices due to a recent slowdown in the world economy.
GLOW’s ongoing expansion projects comprise an IPP project and one SPP project. The company’s 660 MW coal-fired power plant, GHECO-One, is more than six months behind schedule due to the construction delay by the engineering procurement and construction contractor (EPC) and the prolonged test run with EGAT. GHECO-One is expected to be commissioned in the third quarter of 2012. The delay in the GHECO-One project means GLOW must pay a penalty fee to EGAT according to the terms of the PPA. The compensation paid to EGAT for delay in commissioning is expected to be fully covered by DLD received from the EPC contractor. The 110 MW gas-fired plant, built as an SPP project is scheduled to be completed by the end of 2012 with the remaining capital expenditures of about Bt1,300 million. Taken together, the two expansion projects will raise GLOW’s electricity generating capacity by 770 MW. The total capacity of GLOW will then rise by 32% to 3,186 MW by 2012. After the sizeable capital expenditures are completed and no heavy investment is foreseen, GLOW’s leverage and cash flow protection are expected to gradually improve in 2013-2014, said TRIS Rating. — End
Company Rating: Affirmed at A Issue Ratings: GLOW12DA: Bt3,000 million guaranteed debentures due 2012 Affirmed at A GLOW156A: Bt1,500 million guaranteed debentures due 2015 Affirmed at A GLOW173A: Bt1,000 million guaranteed debentures due 2017 Affirmed at A GLOW175A: Bt2,000 million guaranteed debentures due 2017 Affirmed at A GLOW17OA: Bt1,600 million guaranteed debentures due 2017 Affirmed at A GLOW186A: Bt2,500 million guaranteed debentures due 2018 Affirmed at A GLOW194A: Bt2,000 million guaranteed debentures due 2019 Affirmed at A GLOW19OA: Bt1,400 million guaranteed debentures due 2019 Affirmed at A GLOW218A: Bt5,555 million guaranteed debentures due 2021 Affirmed at A Rating Outlook: Stable
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