TRIS Rating Co., Ltd. has assigned a "AA-" rating with "stable" outlook to the Energy Fund Administration Institute (EFAI)'s proposed Bt42,000 million senior bonds. The rating is based on the expectation that EFAI will continue to receive strong government support, as one of EFAI's major responsibilities is to raise funds to enable the Oil Fund to stabilize retail oil prices. Stabilizing oil prices is a government action to alleviate wide fluctuation of oil prices, which may have economic and social effects on the public. The rating also reflects the government's decision to remove the subsidies on gasoline (effective 21 October 2004) and diesel price (effective 13 July 2005) to minimize the burden on the Oil Fund. In addition, according to the Cabinet resolution on 31 May 2005, EFAI's outstanding debt is capped at Bt85,000 million.
The "stable" outlook reflects TRIS Rating's expectation that as EFAI is important to the government's energy policy, EFAI will continue to receive support from government. The rating outlook is also based on the expectation that oil price subsidies will not be reinstated, and that EFAI will continue to have legal authority to withdraw money from the Oil Fund to repay its debt.
TRIS Rating reported that the National Energy Policy Council (NEPC)'s resolution dated 25 August 2005 regarding the issuance of debt by EFAI clearly reflects the government's intention to ensure that EFAI will have enough cash to service its debt obligations. NEPC resolved to support the Committee on Energy Policy Administration to manage the liquidity of the Oil Fund to ensure that the Oil Fund provides EFAI with sufficient funds to meet its debt obligations. In addition, in case of any changes in government policy that negatively impact the financial status of the Oil Fund or decrease EFAI's capability to repay its debt obligations, NEPC will cooperate with the government to implement measures to ensure that EFAI's creditors will receive timely payment of all interest and principal.
However, TRIS Rating stated that these supporting factors are partially offset by EFAI's limited authority to determine either the rate at which the Oil Fund will receive contributions from refineries and oil importers or the rate of subsidy paid by the Oil Fund. In addition, the government is not legally bound to repay or guarantee EFAI's debts.
TRIS Rating said the rating of the senior bonds reflects their structural advantage over other EFAI's obligations (except for the Oil Fund's expenses and EFAI's general & administration expenses, which have higher priority than the senior bonds) such as the LPG price subsidy. Each month EFAI will withdraw all the cash from the Oil Fund, after deducting the operating expenses and fees of EFAI and the Oil Fund, excluding subsidies to oil refineries and oil importers. The cash is then put in a debt service accrual account to cover EFAI's next scheduled payment. After fulfilling the debt service accrual account requirements, excess cash must be added to a debt service reserve account up to a balance of 5% of the amount of outstanding bonds. - End
Energy Fund Administration Institute (EFAI) Issue Rating: Bt42,000 million senior bonds due up to 2009 AA- Rating Outlook: Stable