TRIS Rating has affirmed the company and guaranteed debenture ratings of Glow Energy PLC (GLOW) at “A”. The outlook remains “stable”. 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 and are located in the Map Ta Phut area. The “stable” outlook reflects the expectation that GLOW will receive reliable streams of cash from its long-term power sales contracts with EGAT and its industrial customers. The GHECO-One, coal fired power plant, is expected to achieve its performance targets after its first year in operation and will provide a reliable cash flow stream for GLOW in the coming years.
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. GLOW is the leading private power producer in Thailand. The cogeneration segment generated about 60% of GLOW’s sales and earnings before interest, tax, depreciation, and amortization (EBITDA) in the first three months of 2013. As of March 2013, its power generating capacity totaled 3,188 megawatts (MW), consisting of 1,525 MW in IPP plants and a total of 1,663 MW in cogeneration units. One of GLOW’s IPP plants is a gas fired plant located in Chonburi province, one is a hydro power plant located in Lao PDR, and the other plant is a coal-fired power plant located in Rayong province. GLOW’s cogeneration segment, which is located in the Map Ta Phut Industrial Estate and the 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 2% of GLOW’s total generating capacity serves the automotive industry in Pluag Deang, Rayong.
Out of GLOW’s total capacity of 3,188 MW of electricity and 1,206 tonnes per hour of steam, 2,345 MW of electricity has been contracted to EGAT under several PPAs spanning 21-25 years. The PPAs have remaining terms of four to 25 years. The remainder of GLOW’s electricity and steam generating capacities, together with treated water, are supplied to industrial customers. These long-term commitments provide GLOW with reliable sources of cash inflow. GLOW has implemented series of expansions during 2008-2012. Sales of electricity to EGAT comprised 66% of total revenue in the first quarter of 2013, compared with 55%-60% of total annual revenue during the last three years. Sales to industrial customers accounted for the remainder (34%).
In 2012, GLOW’s IPP units reported lower equivalent availability factors (EAF). Its EAF of 84.8% and forced outages of 5.5% were poorer than the levels in 2011, where EAF was 96.3% and forced outages were 1.8%. The reduced availability was due to scheduled major maintenance shutdowns at its IPP plants in Chonburi. In addition, the new 660 MW coal-fired power plant, or GHECO-One, in Rayong started commercial operation in July 2012. However, the plant encountered a boiler tube leak problem in the first month of operation. During the first quarter of 2013, the IPP units in Chonburi performed smoothly with no major overhauls planned. However, GHECO-One faced another problem with boiler feed pump in the first quarter of 2013. As a result, the combined EAF of the IPP units was only 89.4%, and forced outages were 10.7% in the first quarter of 2013. GLOW’s SPP units operated satisfactorily, with an EAF of 95.9% in 2012 and 97.4% in the first quarter of 2013.
Glow’s financial performance improved in 2012 and in the first quarter of 2013. These were mainly due to improvements in the SPP segment and the start-up of the GHECO-One plant, despite the lower plant availability of the IPP units. The volume of electricity sold to industrial customers continued to rise in 2012. The amount of electricity sold to industrial customers grew 9.2% year-on-year (y-o-y) to 4,640 gigawatt hours (GWh) in 2012, due to increase in customer demand. Demand for steam also increased in 2012, rising by 12.9% by volume. The revenue contribution from the IPP power plants grew significantly in 2012 because of the start-up of the GHECO-One plant in August 2012. The IPP capacity increase drove GLOW’s total revenue higher by 41.7% y-o-y to Bt57,204 million. GLOW’s operating margin before depreciation and amortization declined to 21.8% in 2012 from 23.0% in 2011. The lower margin was due to surging fuel costs and the delay in fuel adjustment charge (Ft) increase. GLOW’s EBITDA grew by 33.2% to Bt12,623 million, from Bt9,477 million in 2011.
GLOW’s financial performance continued to improve in the first three months of 2013. Total revenue grew by 58.0% over the same period last year to Bt17,354 million due to commercial operation of GHECO-One. The operating margin before depreciation and amortization increased to 25.0% in the first quarter of 2013, from 21.8% in 2012. The rise in the operating margin was due to the high Ft, the flat fuel costs, and no major overhaul of IPP units in Rayong. GLOW’s EBITDA jumped to Bt4,468 million in the first quarter of 2013, a 105.3% increase compared with the same period last year. GLOW’s total debt to capitalization ratio has gradually improved, slipping from 65.3% at the end of 2011 to 61.5% at the end of March 2013. The ratio improved because GLOW has completed its investments in many projects. As no heavy investments are foreseen for the time being, GLOW’s leverage and cash flow protection are expected to gradually improve in 2013-2014.
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