TRIS Rating Co., Ltd. has assigned the rating of “A” to the proposed issue of up to Bt1,500 million in guaranteed debentures of Glow Energy PLC (GLOW). At the same time, TRIS Rating has affirmed the company and guaranteed debenture ratings of GLOW at “A”. The outlook remains “stable”. The proceeds from the new debentures will be used for working capital and general purposes. 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 cogeneration and independent power producer (IPP) projects, both in Thailand and in 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 September 2012, its power generating capacity totaled 3,076 megawatts (MW), consisting of 1,525 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, one coal-fired IPP plant is in Rayong province, and 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 3,076 MW of electricity and 1,206 tonnes per hour of steam, 2,253 MW has been contracted to EGAT under several PPAs. The PPAs span 21-25 years, with remaining terms of five to 25 years. Excluding the power commitments to EGAT, the remaining capacities 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.
GLOW’s performance improved in the first nine months of 2012 expansion projects gradually came on stream. Total revenue grew to Bt39,993 million, jumping by 36.1% over the same period of last year. Sales to EGAT under the IPP scheme grew by 32.8% year-on-year (y-o-y) to Bt11,912 million because the GHECO-ONE, coal fired power plant, started up in July 2012 and because the Houay Ho power plant produced more power. The volume of electricity sold to industrial customers continued to rise in the first nine months of 2012, up by 9.6% y-o-y to 3,476 gigawatt hours (GWh) due to increases in customer demand. Sales also rose because the Glow SPP11 Co., Ltd. and Glow SPP13 Co., Ltd. were consolidated with GLOW since August 2011 after acquisition. Demand for steam also increased, rising by 20.6% y-o-y by volume in the first nine months of 2012. GLOW’s operating margin before depreciation and amortization declined to 21.5% in the first nine months of 2012 from 23.0% in 2011. The lower margin was due to surging fuel costs and a delayed increase in the fuel adjustment charge (Ft). However, GLOW’s profitability has improved steadily during the past three quarters, following a gradual rise in the Ft charge. GLOW’s EBITDA rose by 18.8% compared with the same period of last year, to reach Bt8,729 million in the first three quarter of 2012 because more power generating units were operating. Net profit rose significantly, climbing by 40.6% y-o-y to Bt3,981 million. Profits were higher because GLOW had foreign exchange gains of Bt537 million and because it charged delay liquidated damage (DLD) to the contractor of GHECO-One Co., Ltd. (GHECO-One). GLOW recognized DLD from the contractor totaling Bt1,046 million in the first quarter of 2012, while recorded DLD payments to EGAT for the delay of GHECO-ONE totaling Bt634 million.
GLOW’s total debt to capitalization ratio hovered around 65% at the end of September 2012 because of investments in the SPP and GHECO-One projects. Cash flow protection in the first nine months improved gradually. The EBITDA interest coverage ratio increased to 3.4 times in the first nine months of 2012, from 2.7 times in 2011. The funds from operations to total debt ratio improved to 9.5% (non-annualized) from 10.4% in 2011. GLOW’s leverage and cash flow protection are expected to further improve in 2013. All expansion projects will provide earnings and cash flow for the full year, and no major investments are foreseen once it completes planned capital expenditures in 2012, 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 Up to Bt1,500 million guaranteed debentures due within 2018 A Rating Outlook: Stable
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