TRIS Rating has assigned a rating of “A+” to the proposed issue of up to Bt3,000 million in guaranteed debentures of GLOW Energy PLC (GLOW). At the same time, TRIS Rating has affirmed the company and existing guaranteed debenture ratings of GLOW at “A+”. The outlook remains “stable”. The company will use the proceeds from the new debentures to refinance existing loans.
The ratings continue to reflect GLOW’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.
The ratings and/or outlook could be revised upward if there is a significant improvement in the company’s balance sheet and cash flow protection. In contrast, the ratings and/or outlook could be revised downward if GLOW’s operating performance deteriorates significantly or the company engages in a large debt-financed acquisition or investments that would significantly weaken GLOW’s financial profile.
GLOW is the leading private power producer in Thailand. The company was established in 1993 as a Small Power Producer (SPP) in the Map Ta Phut Industrial Estate. Its business scope includes cogeneration and Independent Power Producer (IPP) projects, both in Thailand and neighboring countries. ENGIE remains the major shareholder of GLOW. ENGIE is one of the world’s leading energy providers, supplying energy throughout the world, but primarily in Europe.
As of December 2015, GLOW’s power generating capacity totaled 3,207 megawatts (MW), consisting of 1,525 MW in IPP plants and a total of 1,682 MW in cogeneration units. GLOW’s IPP plants include a 713-MW gas-fired plant located in Chonburi province, a 152-MW hydro power plant located in the Lao People's Democratic Republic (Lao PDR), and a 660-MW 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. Around 2% of GLOW’s total generating capacity serves the automotive industry in Pluak Daeng district, Rayong province.
From GLOW’s total capacity of 3,207 MW of electricity, 2,345 MW has been contracted to EGAT under several PPAs spanning 21-25 years. PPAs have remaining terms of one to 23 years. The remainder of GLOW’s electricity and steam generating capacities, together with treated water, are supplied to industrial customers via long-term contracts. These long-term commitments provide GLOW with reliable sources of cash inflow. Sales of electricity to EGAT comprise approximately 60% of total annual revenue. Sales to industrial customers accounted for the remainder (40%).
Currently, GLOW has two PPA contracts under SPP scheme that will be expired in 2017. The expiring contracts comprise 180 MW of electrical generating capacity or approximately 6% of GLOW’s total capacity. TRIS Rating views that if the PPAs are not extended, the expiration of SPP contracts has no significant impact on GLOW’s financial performance because the expiring contracts account for a small portion of GLOW’s total capacities and the company is able to sell the electrical generating capacity to industrial customers.
The availability factor for overall operations in 2015 was lower than in 2014 as IPP units underwent scheduled maintenance outages. The equivalent availability factor (EAF) of the IPP segment decreased to 90.8% in 2015 from 96.2% in 2014. The net output of electricity from the IPP segment fell to 7,477 gigawatt hours (GWh), a 24% fall from the last year. The large drop was due to planned maintenance of 2 IPP power plants during the first and last quarter and a lower dispatch rate for Glow IPP Co., Ltd. (GIPP). GLOW’s operating performance of cogeneration segment remains satisfactory despite slightly lower availability. The EAF for the cogeneration segment declined to 94.1% in 2015 from 96.6% in 2014. However, the net output of electricity in 2015 was stable, generating 12,655 GWh, close to the last year figure.
GLOW’s financial performance was commensurate to TRIS Rating’s projection. GLOW’s earnings before interest, tax, depreciation, and amortization (EBITDA) in 2015 dropped by 7.8% to Bt18,485 million due largely to the decreasing Available Payment Rate (APR) of GIPP as per the PPA contract. Meanwhile, performance from GHECO-One Co., Ltd. (GHECO-One) and the cogeneration segment continue to its solid, supported by smooth operations and stable volume of electricity sold. The company announced to pay normal and special dividend, totaling about Bt8,400 million for the operating performance in 2015. This amount is equivalent to almost 100% dividend payout. The remaining dividend of Bt6,400 million will be paid in May 2016. TRIS Rating views that this large dividend payment has no material effect on balance sheet, compared to its large cash on hand of about Bt8,700 million at the end of December 2015.
Under TRIS Rating’s base-case scenario, GLOW is expected to continue to generate predictable funds from operation (FFO) of Bt12,000-Bt14,000 million per annum over the next three years. The debt to capitalization ratio is expected to decline since the company still has no major investments in the foreseeable future.
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