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
Predictable cash flow from long-term PPAs
RATCHGEN’s predictable cash flow is stemmed from the long-term PPAs with EGAT (rated “AAA” by TRIS Rating). The PPAs have mitigated most of market risk. RATCHGEN’s revenue depends mostly on plants’ availability. EGAT will make full available payments (AP) to RATCHGEN as long as it can achieve the availability target, regardless of dispatching. In addition, the fuel price risk is also mitigated through the PPAs, as it enables RATCHGEN to pass-through fuel cost to EGAT for any changes in fuel costs, based on the agreed plant’s heat rate.
Proven track record of operation
Both the Ratchaburi and the Tri Energy power plants have almost 20-year track record of smooth operation. The 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.
For the first three months of 2019, the overall availability factor for RATCHGEN’s power plants was 94.3%, better than the target of 89.8%. The plant efficiency metric also outperformed the target. The plant heat rate was 7,073 BTU/kWh, better than the target of 7,143 BTU/kWh
No sizable investment ahead
During the forecast period, RATCHGEN has no plan to make any sizable investment. The new power plants with total capacity of 1,400 megawatts (MW), as specified in the power development plan 2018 (PDP2018), will be developed by its sibling company under RATCH Group PLC (RATCH), its parent company.
Strong balance sheet
TRIS Rating believes RATCHGEN will maintain its strong balance sheet over the next three years. As of December 2018, RATCHGEN only had adjusted debt of Bt3 million. TRIS Rating forecasts RATCHGEN’s balance sheet will stay strong over the next three years. Its debt to capitalization ratio is expected to remain below 10%, depending on its working capital needs. The ratio will likely improve further when the company repays its debentures of Bt2 billion in 2022.
Very strong liquidity profile
RATCHGEN’s liquidity profile is very strong. Its sources of funds comprise cash on hand of Bt2.4 billion.
TRIS Rating forecasts RATCHGEN’s funds from operations (FFO) over the next 12 months to be around Bt5 billion. There will be no debt due over the next 12 months for RATCHGEN. We expect no large investments for RATCHGEN through 2021 other than routine maintenance expenditures of about Bt150-Bt200 million per year.
BASE-CASE ASSUMPTIONS
• Earnings before interest, tax, depreciation and amortization (EBITDA) of RATCHGEN are forecast to fall in the range of Bt5.5-Bt6.5 billion per year during 2019-2021.
• The Tri Energy power plant will be retired in mid-2020.
• Routine maintenance expenditures will be 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 rating downside could 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 RATCH, which is also rated “AAA” by TRIS Rating. RATCHGEN is a flagship of RATCH to invest in conventional power plants in Thailand.
At the end of March 2019, RATCHGEN’s power plant portfolios consisted of two power plants located in Ratchaburi province, with a total capacity of 4,365 MW. The two plants account for 10% of Thailand’s total installed capacity.
RELATED CRITERIA
- Key Financial Ratios and Adjustments, 5 September 2018
- Group Rating Methodology, 10 July 2015
- Rating Methodology – Corporate, 31 October 2007
Ratchaburi Electricity Generating Co., Ltd. (RATCHGEN)
Company Rating: AAA
Rating Outlook: Stable