Thai Rating and Information Services Co., Ltd. (TRIS) announced Monday 11 June 2001 that it has assigned an "A" rating to Tri Energy Co., Ltd.'s (TECO) senior secured debentures valued up to Bt4,250 million. The rating reflects the well-designed project fundamentals, the state-of-the-art power plant and the sponsors' and operator's long-term experience in the power sector. However, these strengths are partially offset by TECO's high leverage balance sheet, lower than expected performance for the first 10 months of operation due to start up problems, and the single asset nature of the company. Also, a major covenant requires TECO's land and machinery to be mortgaged against these debentures within six months after the issuance date.
TRIS reported that TECO is one of seven companies that won licenses as independent power producers (IPPs) in the first round of bidding arranged by the Electricity Generating Authority of Thailand (EGAT) in 1996. The company operates a 700 MW combined cycle gas turbine power plant in Ratchaburi province and successfully achieved its commercial operation date on schedule on 1 July 2000. The investment cost of US$391 million is comparable to other power plants with the same technology. TECO's major contracts are well-structured. A 20-year power purchase agreement (PPA) with EGAT protects TECO from market risk. The pay-if-available structure of the PPA provides the company dependable cash flow, while the revenue adjustment mechanism limits foreign exchange rate risk and inflation risk. A 20-year gas sales agreement (GSA) with the Petroleum Authority of Thailand (PTT) and the structure of energy payments in the PPA limit the company's fuel risk.
TRIS said that the gas turbine combined cycle power plant is a General Electric (GE) Frame 9FA+e, a model designed to improve plant efficiency and heat rate. GE, the project's operator, has good experience and a solid track record, which mitigates against new technology uncertainty. These strengths enable TECO to aggressively set an availability target of approximately 92% over the life of the project. Meeting with this relatively high availability target will require intensive care and a knowledgeable operator to run and maintain the facility at its optimum, TRIS said. A 20-year operation and maintenance agreement (OMA) with the gas turbine's vendor and a large international third-party operator, GE, mitigates technology risk significantly. The performance-based bonus and penalty structure of the OMA encourages GE to operate the plant efficiently. Although the limited penalty cap per annum is far below the possible revenue deduction for under-performance, this level is acceptable when compared to the fixed operating fee paid to GE. In addition, the long-term supply contract on major parts further reduces TECO's operational risk.
TECO is exposed to the single asset risk nature of the project. However, this is partly mitigated by insurance coverage as well as collateral pledged to debentureholders. The 78% debt-to-capitalization ratio is relatively high leverage, and the company's debt service reserve account of three months to match its quarterly debt service schedule, is different from the industry average of six months. Its average debt service coverage ratios (DSCRs) are projected at 1.36 times for the life of the debentures and 1.43 times for the life of the loans. The unusually low DSCR of 1.08 times for 2001 is a result of TECO's intended plan to reduce its power plant's availability to solve its start-up and operational problems.
Tri Energy Co., Ltd. (TECO) Issue Rating TECO#1: Up to Bt4,250 million senior secured debentures due 2003 - 2007 A
-- End --
TRIS reported that TECO is one of seven companies that won licenses as independent power producers (IPPs) in the first round of bidding arranged by the Electricity Generating Authority of Thailand (EGAT) in 1996. The company operates a 700 MW combined cycle gas turbine power plant in Ratchaburi province and successfully achieved its commercial operation date on schedule on 1 July 2000. The investment cost of US$391 million is comparable to other power plants with the same technology. TECO's major contracts are well-structured. A 20-year power purchase agreement (PPA) with EGAT protects TECO from market risk. The pay-if-available structure of the PPA provides the company dependable cash flow, while the revenue adjustment mechanism limits foreign exchange rate risk and inflation risk. A 20-year gas sales agreement (GSA) with the Petroleum Authority of Thailand (PTT) and the structure of energy payments in the PPA limit the company's fuel risk.
TRIS said that the gas turbine combined cycle power plant is a General Electric (GE) Frame 9FA+e, a model designed to improve plant efficiency and heat rate. GE, the project's operator, has good experience and a solid track record, which mitigates against new technology uncertainty. These strengths enable TECO to aggressively set an availability target of approximately 92% over the life of the project. Meeting with this relatively high availability target will require intensive care and a knowledgeable operator to run and maintain the facility at its optimum, TRIS said. A 20-year operation and maintenance agreement (OMA) with the gas turbine's vendor and a large international third-party operator, GE, mitigates technology risk significantly. The performance-based bonus and penalty structure of the OMA encourages GE to operate the plant efficiently. Although the limited penalty cap per annum is far below the possible revenue deduction for under-performance, this level is acceptable when compared to the fixed operating fee paid to GE. In addition, the long-term supply contract on major parts further reduces TECO's operational risk.
TECO is exposed to the single asset risk nature of the project. However, this is partly mitigated by insurance coverage as well as collateral pledged to debentureholders. The 78% debt-to-capitalization ratio is relatively high leverage, and the company's debt service reserve account of three months to match its quarterly debt service schedule, is different from the industry average of six months. Its average debt service coverage ratios (DSCRs) are projected at 1.36 times for the life of the debentures and 1.43 times for the life of the loans. The unusually low DSCR of 1.08 times for 2001 is a result of TECO's intended plan to reduce its power plant's availability to solve its start-up and operational problems.
Tri Energy Co., Ltd. (TECO) Issue Rating TECO#1: Up to Bt4,250 million senior secured debentures due 2003 - 2007 A
-- End --