TRIS Rating has affirmed the company rating of “AAA” to EGAT International Co., Ltd. (EGATi) with “stable” outlook. The rating reflects the company's status as a wholly-owned subsidiary of Electricity Generating Authority of Thailand (EGAT) to invest in power and energy projects outside Thailand. EGATi's rating also reflects its high degree of operational integration with EGAT and its important role in supporting EGAT's long-term strategy of providing sufficient electricity for the country. The rating also takes into consideration the strong support from EGAT.
The “stable” outlook reflects the expectation that EGATi will remain a wholly-owned subsidiary of EGAT and play an important role for EGAT to source electrical energy abroad for use in Thailand.
The downside factors for EGATi's rating are a deterioration in EGAT's credit profile, a change in EGATi's relationship with EGAT, or a reduction in support from EGAT.
EGATi was founded by a Cabinet resolution dated 30 October 2007. EGATi’s objective is to serve as EGAT’s representative to participate in government-to-government (G-to-G) power projects in neighboring countries. Since inception, EGATi has been 100% owned by EGAT. EGAT is a major state-owned enterprise, responsible for the entire electricity generating system and the power transmission system for Thailand. As of June 2016, the power plants owned by EGAT constituted 40% of the total electricity generating capacity in Thailand. EGAT has been a sole off-taker for the balance of the electricity capacity (60%) owned by private power producers. EGAT also owns and operates the entire power transmission grid in Thailand. EGAT sells electrical energy in bulk to the Metropolitan Electricity Authority (MEA) and the Provincial Electricity Authority (PEA). Given its critical role in the power sector and the provisions under the EGAT Act B.E. 2511 (1968), EGAT's creditworthiness is closely tied with the Thai government.
According to the current power development plan, PDP2015, Thailand will need to import 12,347 megawatts (MW) of electricity at the end of plan in 2036, increasing by approximately 10,000 MW from the current level. The proportion of imported electricity will increase significantly over the next 20 years, from 6% of total capacity at the end of 2014 to 18% at the end of 2036. In order to secure long-term sources of electrical energy for the country, EGATi has a mission to participate in power projects in neighboring countries and supply electricity to Thailand with EGAT as the main or sole off-taker.
Currently, EGATi's investment portfolio consists of three power projects, one each in the Lao People’s Democratic Republic (Lao PDR), Myanmar, and Vietnam. The combined generating capacity is 4,609 MW. EGATi has a policy to hold 30%-40% interest in these projects. Of the three projects, the Nam Ngiep 1 hydropower project (Nam Ngiep 1) in the Lao PDR has made the most progress. The commercial operation is expected to commence in 2019. At the end of June 2016, the project was 45% complete, ahead of schedule by two percentage points. The Nam Ngiep 1 project has an installed capacity of 289 MW. It has a 27-year power purchase agreement (PPA) with EGAT to supply 1,459 gigawatt hour (GWh) of electricity to Thailand. EGATi holds a 30% stake in this project. EGATi budgeted US$84 million as an equity contribution in the project.
EGATi has submitted the feasibility studies and environmental impact assessment for developing a 1,320-MW coal-fired power plant in Vietnam (the Quang Tri project). As for the Mong Ton project, a hydro power plant in Myanmar, EGATi redesigned the project to be cascade dam with a capacity of 3,000 MW for the first phase, as requested by the government of Myanmar. The original plan called for 7,000 MW. EGAT received an approval from the Ministry of Energy of Thailand to make an equity contribution of Bt17 billion to EGATi. At the end of March 2016, EGAT made an equity contribution of Bt5.2 billion. EGATi will use the funds for its projects, earmarking Bt3.7 billion for the Nam Ngiep 1 project and Bt1.5 billion for developing the Mong Ton project.
EGATi's operations are highly integrated with EGAT. As a wholly-owned subsidiary, EGATi continuously receives supports from EGAT in terms of manpower, system, knowledge transfer, and shared experience. EGATi's management and members of board members were appointed by EGAT. EGATi's operating expenses and investments are financed by EGAT.
EGATi is in the initial investment phase. All investments are green-field projects, which need five to 10 years to develop. EGATi is expected to record losses for at least three years until Nam Ngiep 1, its first investment project, commences operation in 2019. In 2016, EGATi targets to invest about a 10%-20% stake in a coal company in Indonesia with the aim to get sufficient dividend to cover operating expenses. The investment also aims to secure coal supply for EGAT’s coal-fired power plants and the Quang Tri project. This investment will be funded by the equity contribution from EGAT.
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