TRIS Rating Co., Ltd. has assigned the rating of “A” to the proposed issue of up to Bt2,000 million in senior debentures of Bangkok Expressway PLC (BECL). At the same time, TRIS Rating has affirmed the company and current issue ratings of BECL at “A”. The outlook remains “stable”. The proceeds from the new debentures will be reserved for financial flexibility. The ratings reflect a solid track record of traffic volume on BECL’s expressways, which translates into reliable operating cash flow. The ratings also reflect the benefit of being the only toll road system linked to the First Stage Expressway System (FES), and the strong track record of BECL’s management team. These strengths are partially offset by uncertainty over future government transportation policies, the government’s potential intervention in future toll rate adjustments and the sizable investments required for any new expressway concession. The “stable” outlook reflects TRIS Rating’s expectation that BECL will continue to generate solid operating cash flow which will be reserved as a liquidity cushion for debt repayments. TRIS Rating also expects that the company will carefully manage dividend payments and its capital structure, especially during the investment period, in order to maintain its financial strength.
TRIS Rating reported that BECL built and operates the elevated Si Rat Expressway (the Second Stage Expressway System or the SES) and the Udon Ratthaya Expressway (Bang Pa In-Pak Kret Expressway), known as SES Sector C+. Both expressways were established under 30-year Build-Transfer-Operate (BTO) concessions awarded by the Expressway Authority of Thailand (EXAT). The SES, the extension of SES (Sector D), and the Sector C+ concessions will expire in 2020, 2027, and 2026, respectively. The SES is linked to the FES, which was constructed and has been operated by the EXAT. The roads form a city ring road, with routes to the north, east, southeast, and southwest, creating a comprehensive road network for Bangkok residents. The network provides an alternative to the heavily congested free roads within central Bangkok and the suburbs. BECL shares revenue with EXAT on the urban network (FES, and SES Sector A and B). From March 2011 onward, the sharing ratio with EXAT was changed from 50:50 to 40% for BECL and 60% for EXAT. For the suburban network and Sector C+, BECL does not share revenue with EXAT. As a consequence, BECL’s average daily toll revenue in 2011 declined by 6.4%, despite a 5.2% increase in traffic volume. However, average daily toll revenue in the first six months of 2012 was Bt20.9 million, back to the same level before revenue sharing adjustment.
TRIS Rating said, the traffic volume on BECL’s network has grown steadily since inception. The compound annual growth rate over the past 10 years (2001-2011) was 3.7%. In the first six months of 2012, the average daily traffic volume was 1,076,559 vehicles per day, up 5.8% year-on-year (y-o-y), supported mainly by the growth in the traffic volume on the suburban network, especially Sector D. TRIS Rating expects that in the medium term, traffic volume on the expressways will continue to grow based on economic growth, the growth in the number of registered cars in Bangkok and vicinity, a rising population in Bangkok, the expansion of residential housing into the areas surrounding the city, and heavy traffic congestion on free roads.
For the first six months of 2012, BECL reported toll revenue of Bt3,809 million and funds from operation (FFOs) of Bt2,530 million, up 2% and 9%, respectively, compared to the same period of the prior year. The improvement was driven by a 5.8% increase in traffic volume, especially the suburban network. The operating margin slightly dropped to 78.5%, compared with 80.24% in the same period of the prior year. The drop in the operating margin was due to the revenue sharing adjustment and higher selling and administrative expenses, caused by higher insurance premiums and toll collection expenses. The company’s cash flow protection was strong, with the FFOs to total debt ratio of 12.99% (non-annualized). In the medium term, BECL’s debt protection is expected to weaken from the current level. The weakening will be caused by the capital expenditures of approximately Bt25,000 million for the Si Rat Outer Ring Road Expressway concession. The needed funds are expected to be financed by using internal cash flow, general bank loans, and debentures. Construction is due to start in 2012 and finish in 2016. TRIS Rating expects that BECL’s leverage will peak in 2015, as expressway construction progresses. As of June 2012, BECL’s adjusted debt (total debt minus cash and marketable securities) stood at Bt14,472 million, down from Bt15,901 million as of December 2011. — End.
Company Rating: Affirmed at A Issue Ratings: BECL139A: Bt1,000 million senior debentures due 2013 Affirmed at A BECL13NA: Bt1,100 million senior debentures due 2013 Affirmed at A BECL144A: Bt1,000 million senior debentures due 2014 Affirmed at A BECL148A: Bt1,700 million senior debentures due 2014 Affirmed at A BECL153A: Bt1,000 million senior debentures due 2015 Affirmed at A BECL214A: Bt1,000 million senior debentures due 2021 Affirmed at A Up to Bt2,000 million senior debentures due within 2016 A Rating Outlook: Stable
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