TRIS Assigns COCO's Senior Debentures at "BBB+"
Thai Rating and Information Services Co., Ltd. (TRIS) announced Thursday 27 July 2000 that it has assigned the "BBB+" rating to the Bt2,000 million senior debentures due 2005 of The Cogeneration PLC (COCO). The rating reflects COCO's well-structured Power Purchase Agreements (PPAs), efficient cogeneration technology, long-term fuel supply contracts and diversification of fuel types. However, concern of the company's near term financial position and the limited track record of operating its phase 3 power plants partially offset these factors.
TRIS said that COCO's long-term PPAs with the Electricity Generating Authority of Thailand (EGAT) and with industrial clients ensure the stability of cash flow. A minimum sales of electrical energy volume is guaranteed. Capacity charge adjustments for foreign exchange exposure and compensation payments for fuel price fluctuation risk were allowed.
The company uses a commercially proven cogeneration technology, which can generate power at 65%-70% of possible thermal efficiency. The cogeneration system also suits its clients' variety of demands, which are power, steam and treated water. Major equipment was supplied by well-recognized manufacturers, such as General Electric (GE) and GEC Alstom. To ensure the availability of maintenance services and spare parts, COCO and its subsidiary, MTP Cogeneration Co. Ltd., signed long-term service agreements with The Consortium of General Electric Energy Parts Inc. & General Electric International Operations Co. Under the service agreements, GE will provide parts and services for gas turbine generators at specific prices during the next 9 to 11 years. COCO's coal-fired plant alleviates fuel procurement risk by reducing dependency on gas. The volume of gas the company consumes is expected to shrink from 100% of total fuel to 75% once the coal-fired plant is fully operational. Furthermore, long-term gas and coal supply contracts guard against fuel shortages. Although the projects no longer have construction risk, operating risk remains. The power plants of phase 3, especially the just-completed coal-fired plant, will take some time to operate to assure that these power plants might not face operating interruptions and output instability. On a consolidated basis, COCO's debt-to-capitalization was 61.72% as of March 2000, and debt service coverage ratio (excluding reserve accounts and cash) was at 1.61 times for fiscal year ended 30 June 1999.
The Cogeneration PLC (COCO): Issue rating COCO#1: Bt2,000 million senior debentures due 2005 BBB+