TRIS Rating affirms the company rating on Ratchaburi Electricity Generating Co., Ltd. (RATCHGEN) at “AAA”. The rating continues to reflect the predictable cash flows RATCHGEN receives from its long-term power purchase agreements (PPAs) with the Electricity Generating Authority of Thailand (EGAT), its state-of-the-art Ratchaburi and Tri Energy power plants, as well as the company’s proven record of managing power plants and its strong balance sheet.
KEY RATING CONSIDERATIONS
Reliable cash flow from long-term PPAs with EGAT
RATCHGEN’s power plants have long-term PPAs with EGAT (rated “AAA” by TRIS Rating). The PPAs call for RATCHGEN to keep its power plants available for dispatch orders received from EGAT. EGAT will make full available payment (AP) to RATCHGEN as long as it can achieve the availability target. The PPAs enable RATCHGEN to pass-through fuel cost to EGAT at any changes in the cost of fuel, which helps reduce fuel price risk.
Proven track record
Ratchaburi and Tri Energy power plants have almost 20-year track record of smooth operation. Its plants have been able to meet the availability targets specified in the PPAs. During the last 10 years, the plant availability figures and plant efficiency values have exceeded the targets set in the PPAs almost every year.
No sizable investment ahead
RATCHGEN has no plan to make any sizable investment from now through 2020. Currently, Thailand has a sufficient power reserve margin, meaning the existing power-generating capacity will exceed demand for at least the next five years. In addition, renewable energy trend has limited the need for new conventional power plants in Thailand.
Strong balance sheet
RATCHGEN’s financial position will stay strong for at least the next three years. As of March 2018, RATCHGEN had total debt of Bt3.8 billion and the total debt to capitalization ratio of 13.2%. We forecast RATCHGEN’s debt to capitalization ratio will maintain in the range of 13%-16% through 2020, depending on its working capital needs. The ratio will improve further when the company repays its debentures of Bt2 billion in 2022.
Ample liquidity
RATCHGEN’s liquidity profile is very strong. Its sources of funds comprise cash on hand of Bt557 million and undrawn credit facilities of Bt24.5 billion as of March 2018. We expect its funds from operations (FFO) over the next 12 months will be around Bt6.5 billion. Debts due over the next 12 months, in the form of a shareholder loan, amount Bt1.8 billion. We expect no large investment through 2020 other than routine maintenance expenditures of about Bt150-Bt200 million per year.
RATING OUTLOOK
The “stable” outlook reflects our expectation that RATCHGEN will continue to meet the plant availability and efficiency targets spelled out in the PPAs. We also expect RATCHGEN to generate reliable streams of revenue throughout the lives of the PPAs.
RATING SENSITIVITIES
The credit rating downside may occur if RATCHGEN’s financial leverage increases dramatically due to any large-scale, debt-funded investment.
COMPANY OVERVIEW
RATCHGEN is a wholly-owned subsidiary of Ratchaburi Electricity Generating Holding PLC (RATCH), which is also rated “AAA” by TRIS Rating. RATCHGEN is a flagship for RATCH to investment in conventional power plants in Thailand.
At the end of March 2018, RATCHGEN’s power plant portfolio consisted of two power plants located in Ratchaburi province, with a total capacity of 4,365 megawatts (MW). The two plants account for 10% of Thailand’s total installed capacity.
Ratchaburi Electricity Generating Co., Ltd. (RATCHGEN)
Company Rating: AAA
Rating Outlook: Stable