TRIS Rating affirms the company rating on Amata B. Grimm Power 3 Ltd. (ABP3) at ?A-? with a ?stable? rating outlook. The rating reflects the predictable cash flows ABP3 receives through a long-term power purchase agreement (PPA) with the Electricity Generating Authority of Thailand (EGAT) under the Small Power Producer (SPP) scheme. The rating also reflects the use of proven technology in its cogeneration power plant. In addition, its major shareholder, B. Grimm Power PLC (BGRIM) has a strong track record in operation of gas-fired power plants.
KEY RATING CONSIDERATIONS
Predictable cash flow from long-term PPAs with EGAT
ABP3 has a 25-year PPA with EGAT, covering 90 megawatts (MW), under the SPP scheme. Under the terms of a standard PPA for an SPP cogeneration plant, EGAT agrees to dispatch at least 80% of the contracted capacity, based on plant operating hours. The PPA is on a take-or-pay basis, which stabilizes the cash flow ABP3 receives. In addition, the risks of fuel price and exchange rate fluctuations are largely mitigated through the tariff formula specified in the PPA.
In addition to the PPA with EGAT, ABP3 has long-term off-take agreements with industrial customers in Amata City (Chonburi) Industrial Estate (ACCIE). The agreements cover 46 MW of electricity and 13 tonnes per hour of steam. The contracts with the customers in the industrial estate specify the minimum amounts of electricity and/or steam each customer is obligated to purchase.
The electricity tariffs charged to the industrial customers are based on the electricity tariffs the Provincial Electricity Authority (PEA) charges to large general service customers. The tariffs generally carry a fuel adjustment charge, or Ft, to reflect changes in the price of fuel. However, the Ft adjustment carries a time lag and is subject to the authorities? discretion on the timing and size of the adjustments.
Proven technology mitigates operational risks
ABP3's combined cycle cogeneration power plant employs proven technology from Siemens, one of the world's leading suppliers in the power industry. The Siemens SGT 800 gas turbine has a proven track record, with more than 100 units sold worldwide since 1997. ABP3?s power plant comprises two gas turbine units with bypass stacks, two heat recovery steam generators, and one steam turbine. The gas turbines and the steam turbine are all made by Siemens. The Siemens gas turbines have bypass stacks, which give the power plant additional flexibility. For example, ABP3 can operate the gas turbines even when the steam turbine is undergoing maintenance or for load management purposes.
In September 2018, ABP3 extended another 16-year long-term service agreement (LTSA) for gas turbines with Siemens under the collaboration between Siemens and BGRIM. The LTSA will expire in 2034 and cover two major overhaul (MO) cycles of the power plant. The LTSA will benefit the power plant through a higher availability factor and improved efficiency.
Under the LTSA, Siemens provides maintenance services, including spare parts and performance upgrades, for the gas turbine units. The LTSA helps ensure the reliability of the turbines and keeps maintenance costs under control.
Proven track record in power plant operations
For day-to-day operations, ABP3 has its own operation and maintenance teams. The teams leverage BGRIM?s expertise in the operation and maintenance of cogeneration power plants. ABP3?s operations have met the targets specified in the PPA since the plant started up in 2012.
For the first nine months of 2020, the plant?s actual availability factor was 97.4% and the heat rate was 7,508 British thermal units/kilowatt-hour (BTU/kWh), better than the figure of 8,000 BTU/kWh specified in the PPA. In terms of energy efficiency, ABP3?s plant achieved the primary energy saving (PES) threshold and received an additional tariff of THB0.36/kWh from EGAT as a fuel saving (FS) payment.
Sales are largely contributed by EGAT
ABP3?s sales to EGAT constituted about 60%-70% of total sales per annum. During 2017-2019, ABP3 annually sold about 612-635 gigawatt-hours (GWh) of electricity to EGAT, 221-248 GWh to industrial customers, and 77-93 GWh to related companies (other power plants in ACCIE owned by BGRIM) for load management purposes. ABP3?s revenue and earnings have been stable for the past several years. During 2017-2019, revenues ranged from THB2.8-THB3.1 billion per year. Earnings before interest, taxes, depreciation, and amortization (EBITDA) ranged from THB721-THB814 million per year over the same period. Revenues for the period from 2017 to 2019 were derived from electricity sold to EGAT (65%), electricity sold to industrial customers (25%), and steam sold to industrial customers (3%).
Low impact from COVID-19
For the first nine months of 2020, ABP3 sold about 482 GWh of electricity to EGAT, 156 GWh to industrial customers, and 39 GWh to related companies. Total electricity sale volume dropped 4.7% from the same period of the previous year. The decreased electricity sale volume was mainly attributed to the 40% drop in power demand of industrial customers in the second quarter of 2020, induced by the fallout from the Coronavirus Disease 2019 (COVID-19). ABP3?s revenues recovered in the third quarter of 2020. Nevertheless, total revenue for the first nine months of 2020 decreased by 8.1% on a year-on-year basis to THB2.1 billion. However, EBITDA increased by 6.1% to THB592 million due to the lower gas price while the Ft remained fixed.
Satisfactory debt service capability
In April 2017, ABP3 borrowed THB3.7 billion from Amata B. Grimm Power SPV1 Ltd. (ABPSPV) as an inter-company loan. The proceeds were used to refinance an outstanding bank project loan. The repayment schedule of the inter-company loan matches the maturity of the bonds issued by ABPSPV. ABP3?s debt service obligations vary significantly from year to year. Debt services will range from THB14 million to THB705 million per year during 2018-2032 with no principal repayments called for in 2018, 2019, 2025, and 2031. The first principal repayment was made in April 2020. We expect ABP3 to manage its liquidity needs and reserve cash for the years in which large principal repayments are scheduled to be made.
As of September 2020, ABP3 had cash on hand and cash equivalents of THB785 million. EBITDA is forecast to be THB680-THB787 million per year during 2020-2024. The cash on hand and cash equivalents plus the forecast EBITDA exceed the debt service obligations of THB316-THB589 million due in 2021-2024.
BASE-CASE ASSUMPTIONS
? During 2020-2024, the plant availability factor to be in the range of 92%-98%.
? PPA with EGAT to be 90 MW, PPAs with industrial customers to be 46 MW, and steam purchase agreements with industrial customers to be 13 tonnes/hour.
? During 2020-2024, revenue to be in the range of THB2.5-THB2.8 billion per year. EBITDA is projected to be in the range of THB680-THB787 million per year. Cash on hand to stay around THB0.6-THB1 billion per year.
? Capital expenditure to be THB4-THB39 million per year.
? The inter-company loan repayment is made according to repayment schedule.
RATING OUTLOOK
The ?stable? rating outlook reflects TRIS Rating?s expectation that ABP3 will maintain smooth operations and generate a reliable EBITDA of THB680-THB787 million per year.
RATING SENSITIVITIES
The upside for the rating on ABP3 is limited over the next 12-18 months. The rating downside case may arise if ABP3?s operating performances or financial results deteriorate significantly, hurting its capability to generate cash.
COMPANY OVERVIEW
ABP3 was established in 2010 to own and operate a cogeneration power plant under the SPP scheme. The plant is located in ACCIE, Chonburi province. The power plant has an installed capacity of 132.5 MW plus 30 tonnes per hour of steam. Of the 132.5 MW, 90 MW is sold to EGAT under a 25-year PPA while the rest is sold to industrial customers in ACCIE. ABP3 also has a 25-year gas supply contract with PTT PLC and a long-term water supply agreement with AMATA Water Co., Ltd. The company entered into an LTSA with Siemens, the technology provider, under which Siemens will maintain the gas turbines, ensuring reliable operations. ABP3 has a contract with the PEA to purchase backup power in the event of an emergency. ABP3's plant commenced commercial operation on 1 October 2012. As of September 2020, ABP3's shareholders were BGRIM (60.7%), Summit Sunrise Energy Co., Ltd. of the Sumitomo Group (SSEC -- 18%), Amata Corporation PLC (AMATA -- 18.3%), and B. Grimm Joint Venture Holding Ltd. (BGJV -- 3%).
RELATED CRITERIA
- Rating Methodology ? Corporate, 26 July 2019
- Key Financial Ratios and Adjustments, 5 September 2018
- Group Rating Methodology, 10 July 2015
Amata B. Grimm Power 3 Ltd. (ABP3)
Company Rating: A-
Rating Outlook: Stable