TRIS Rating Co., Ltd. has affirmed the “AA-” ratings for the senior bonds of the Energy Fund Administration Institute (EFAI) with “stable” outlook. The ratings are 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, in order to minimize the impact on the economy and the public. The ratings also reflect the government’s decision to remove the subsidies on gasoline (effective on 21 October 2004) and diesel prices (effective on 13 July 2005), both of which significantly minimize the financial burden on the Oil Fund.
The “stable” outlook reflects TRIS Rating’s expectation that EFAI will continue to receive strong government support . 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 (CEPA) to manage the liquidity of the Oil Fund, and directed CEPA to set the contribution rates to the Oil Fund high enough 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. In October 2006, CEPA resolved to increase the ceiling on contribution rates for gasoline, gasohol and diesel from Bt2.50 per liter to Bt4.00 per liter. This clearly demonstrates the government’s resolve to strengthen the Oil Fund’s financial position, which will ultimately support EFAI’s ability to meet its debt servicing obligations.
In addition, in October 2006, the contribution rates were increased across the board. The rate for ULG 95R was raised from Bt2.50 per liter to Bt3.46 per liter, while the rate for ULG 91R increased from Bt2.30 per liter to Bt3.26 per liter, the rate for gasohol increased from Bt0.54 per liter and the rate for diesel increased from Bt0.95 per liter to Bt1.50 per liter. As a result of these increases, the Oil Fund’s monthly revenue increased from Bt2,500-Bt3,500 million to Bt4,000-Bt4,500 million. However, monthly revenue is expected to decline as the usage of biodiesel and gasohol increases, since the contribution rates for these fuel types are far lower than the rates for diesel and ULG 95R. EFAI’s debt service coverage ratio is expected to be at around 1.9 times in 2007 and 2.8 times in 2008 since EFAI’s debt is expected to reduce in 2008.
TRIS Rating, however, said 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 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.
The ratings of EFAI’s senior bonds reflect structural advantage over other Oil Fund’s obligations (except for the Oil Fund’s general and administration expenses, which have higher priority than the senior bonds) such as the LPG price subsidy, which was around Bt11,000 million at the end of February 2007. Each month, EFAI will withdraw all the cash from the Oil Fund, after deducting EFAI’s and the Oil Fund’s operating expenses and fees, excluding subsidies to oil refineries and oil importer. The cash is then put in a debt service accrual account to cover EFAI’s next scheduled payment. In addition, there is a debt service reserve account that has been maintained at 5% of outstanding debt since the second quarter of 2006. The fund has been kept around Bt2,900 million since February 2006, which was around 11% of total outstanding debt at the end of February 2007. -- End
The Energy Fund Administration Institute (EFAI)
Issue Ratings:
EFAI07OA: Bt8,800 million senior bonds due 2007 Affirmed at AA-
EFAI08OA: Bt8,800 million senior bonds due 2008 Affirmed at AA-
Rating Outlook: Stable
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Copyright 2007, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the
credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information.
The “stable” outlook reflects TRIS Rating’s expectation that EFAI will continue to receive strong government support . 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 (CEPA) to manage the liquidity of the Oil Fund, and directed CEPA to set the contribution rates to the Oil Fund high enough 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. In October 2006, CEPA resolved to increase the ceiling on contribution rates for gasoline, gasohol and diesel from Bt2.50 per liter to Bt4.00 per liter. This clearly demonstrates the government’s resolve to strengthen the Oil Fund’s financial position, which will ultimately support EFAI’s ability to meet its debt servicing obligations.
In addition, in October 2006, the contribution rates were increased across the board. The rate for ULG 95R was raised from Bt2.50 per liter to Bt3.46 per liter, while the rate for ULG 91R increased from Bt2.30 per liter to Bt3.26 per liter, the rate for gasohol increased from Bt0.54 per liter and the rate for diesel increased from Bt0.95 per liter to Bt1.50 per liter. As a result of these increases, the Oil Fund’s monthly revenue increased from Bt2,500-Bt3,500 million to Bt4,000-Bt4,500 million. However, monthly revenue is expected to decline as the usage of biodiesel and gasohol increases, since the contribution rates for these fuel types are far lower than the rates for diesel and ULG 95R. EFAI’s debt service coverage ratio is expected to be at around 1.9 times in 2007 and 2.8 times in 2008 since EFAI’s debt is expected to reduce in 2008.
TRIS Rating, however, said 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 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.
The ratings of EFAI’s senior bonds reflect structural advantage over other Oil Fund’s obligations (except for the Oil Fund’s general and administration expenses, which have higher priority than the senior bonds) such as the LPG price subsidy, which was around Bt11,000 million at the end of February 2007. Each month, EFAI will withdraw all the cash from the Oil Fund, after deducting EFAI’s and the Oil Fund’s operating expenses and fees, excluding subsidies to oil refineries and oil importer. The cash is then put in a debt service accrual account to cover EFAI’s next scheduled payment. In addition, there is a debt service reserve account that has been maintained at 5% of outstanding debt since the second quarter of 2006. The fund has been kept around Bt2,900 million since February 2006, which was around 11% of total outstanding debt at the end of February 2007. -- End
The Energy Fund Administration Institute (EFAI)
Issue Ratings:
EFAI07OA: Bt8,800 million senior bonds due 2007 Affirmed at AA-
EFAI08OA: Bt8,800 million senior bonds due 2008 Affirmed at AA-
Rating Outlook: Stable
----------------------------------------------------------
Copyright 2007, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the
credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information.