TRIS Rating has affirmed the company and senior debenture ratings of Bangkok Expressway PLC (BECL) at “A” with “stable” outlook. The ratings reflect the consistent traffic volume on BECL’s expressways, as it is the only toll road system linked to the First Stage Expressway System (FES). The ratings also take into consideration the reliability of the company’s operating cash flows and the strong track record of its management team. These strengths are partially offset by the uncertainty over the government’s future transportation policies and potential intervention in future toll rate adjustments, as well as the company’s sizable investments required for any new expressway concession. The “stable” outlook reflects TRIS Rating’s expectation that BECL will continue to generate solid streams of cash and employ cautious financial policies, particularly during the investment period. Any investment in associated companies or in any new projects should be prudently considered so as to maintain its financial strength and credit quality.
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 the 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 joining of both the FES and SES expressways creates a comprehensive expressway network, which provides an alternative to the heavily congested free roads within central Bangkok and the suburbs. BECL shares the toll revenue with EXAT on the urban network (FES and SES Sector A and B). However, the toll revenues from Sector C, D, and C+ are paid in full to BECL. From March 2011 onward, the toll sharing ratio with EXAT was changed from 50:50 to 40% for BECL and 60% for EXAT. As a consequence, BECL’s average daily toll revenue in 2011 declined by 6.4%, despite a 5.2% increase in traffic volume. Thanks to the continuing growth in traffic volume, average daily toll revenue in 2012 rebounded to the same level before the change in the revenue sharing ratio, or approximately Bt21.1 million per day.
BECL was awarded the concession of the Si Rat-Western Bangkok Outer Ring Road Expressway. The construction began on 15 December 2012. The concession is a BTO concession, covering 30 years, including a construction period of up to 48 months. BECL will receive 100% toll collection. The total project cost is Bt25,491 million.
Since the inception, the traffic volume of BECL’s expressway network has grown steadily, rising at a compound annual growth rate of 3.1% during the past 10 years. In 2012, the average daily traffic volume grew by 5.8% year-on-year (y-o-y) to 1,084,576 vehicles per day. The rise was mainly driven by the high growth in the traffic volume on the suburban network. TRIS Rating expects that, in the medium term, traffic volume on the expressways will continue to grow, based on these reasons: an ongoing economic growth, steady increases in the number of registered cars in Bangkok and the vicinity, a rising population in Bangkok, and more residential housing added to the areas surrounding the city.
BECL reported toll revenue of Bt7,732 million in 2012, or a 5.8% y-o-y increase. The rise in toll revenue matched the growth in average daily traffic volume, especially on the suburban network. However, BECL’s operating margin dropped slightly to 78.81% in 2012, compared with 80.19% in 2011. The drop in the operating margin was due to the revenue sharing adjustment and higher administrative expenses mainly caused by higher insurance premiums and toll collection expenses.
In terms of BECL’s financial profile, total debt was approximately Bt19,000 million during 2011 and 2012. However, the total debt to capitalization ratio declined to 46.80% in 2012, from 50.47% in 2011, due to a larger equity base. The company’s cash flow protection remains strong. Funds from operations (FFO) increased from Bt4,603 million in 2011 to Bt4,795 million in 2012. The FFO to total debt ratio also improved, climbing from 24.17% in 2011 to 25.23% in 2012. However, the company’s debt level is expected to increase considerably in the medium term, mainly due to the investment in the Sector B+ project. BECL plans to finance approximately 75% of the new expressway project cost, or Bt19,000 million with long-term debt. In addition, the company increased its investment in Thai Tap Water PLC (TTW) from a 9.24% equity stake to 20.24%. The additional investment costs Bt3,134 million. BECL will make Bt2,600 million of the TTW investment in 2013 and the remaining balance will be paid over the next two years.
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