TRIS Rating has upgraded the company and guaranteed debenture ratings of Glow Energy PLC (GLOW) to “A+” from “A” with “stable” outlook. The upgrades reflect the company’s strengthened operating and financial performance after the completion of new independent power producer (IPP) and small power producer (SPP) units, its larger base of cash flow generation and its improved balance sheet. The ratings continue to 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 stable streams of cash from its long-term power sales contracts with EGAT and its industrial customers. TRIS Rating also expects GLOW will sustain a good level of operating performance and deliver reliable cash flow streams as planned.
GLOW is the leading private power producer in Thailand. The company was established in 1993 as a SPP in the Map Ta Phut Industrial Estate. Its business scope includes cogeneration and 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.
As of June 2014, GLOW’s 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 another plant is a coal-fired power plant located in Rayong province. GLOW’s cogeneration segment, with plants 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. Around 2% of GLOW’s total generating capacity mainly serves the automotive industry in Pluak Daeng, Rayong province.
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. PPAs have remaining terms of three 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. Sales of electricity to EGAT comprised 65% of total revenue in the first half of 2014. Sales to industrial customers accounted for the remainder (35%).
In 2013, the net output of electricity from the IPP segment sharply increased to 9,550 gigawatt hours (GWh) due to a new coal-fired power plant, GHECO-One, which started commercial operation in August 2012. The forced outage, however, was substantially high at 6.8%. In 2013, GHECO-One encountered a boiler leak and a pre-heater leak in the first and third quarter, dragging overall equivalent availability factors (EAF) to 88.4%. In the first half of 2014, GHECO-One reported smoother operations as its availability rose to 94.5%. The improved availability of GHECO-One boosted the availability of all the IPP plants to an average of 97.4% in the first half of 2014. GLOW’s SPP units operated consistently, with an EAF of 97.5% in 2013 and 96.2% in the first half of 2014. A slight drop was due to planned maintenance.
GLOW’s financial performance improved in 2013 and in the first half of 2014. Revenue rose once GHECO-One started up in August 2012 and a new SPP unit came on-stream in December 2012. In 2013, the electricity volume from the IPP units was 9,550 GWH, up 33.1% year on year (y-o-y). The volume from the SPP units increased by 7.2% y-o-y to 10,346 GWH, despite flat demand from GLOW’s industrial customers. As a result, GLOW’s total revenue soared by 21% to Bt69,207 million in 2013, from Bt57,204 million in 2012. Similarly, GLOW’s operating margin before depreciation and amortization (operating margin) improved to 25.4% in 2013 from 21.8% in 2012 due to the improved operation of GHECO-One in the last quarter of 2013, an increase in the fuel adjustment charge (Ft), and a decrease in coal price.
In the first half of 2014, total revenue continued to grow, climbing by 10.5% over the same period of last year, to Bt37,843 million. The operating margin slightly improved to 27.5%. The rise in the operating margin was due to a 15-satang/unit increase in the Ft charge, lower coal prices, and the high availability of GHECO-One. GLOW’s total debt to capitalization ratio has improved gradually. The ratio slightly declined from 58.0% to 55.7% in the first half of 2014. The capital structure is expected to strengthen as no major investments are planned in foreseeable future. The debt to capitalization ratio is likely to fall below 50%, equivalent to a debt to equity ratio of 1 times, within 2015. The earnings before interest, tax, depreciation, and amortization (EBITDA) interest coverage ratio was 6.2 times in the first half of 2014 and the funds from operations (FFO) to total debt ratio was 24.6% (annualized with the trailing 12 months). GLOW’s liquidity is expected to strengthen as the amount of outstanding long-term debt declines.
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