TRIS Rating Co., Ltd. has upgraded the rating of the Energy Fund Administration Institute’s (EFAI) issue of Bt8,800 million in senior bonds (EFAI08OA) to “AA” from “AA-” with “stable” outlook. The upgraded rating is based on EFAI’s accumulated cash reserve in the escrow account, which is equal to its outstanding debt servicing obligations, including principal and interest. This cash can be used only to pay its senior bonds obligations. In addition, the rating reflects 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, which in turn minimizes the impact of fluctuating oil prices to consumers.
The “stable” outlook ESOPreflects TRIS Rating’s expectation that EFAI will continue to receive strong government support. The outlook is also based on the expectation that the current oil price subsidy scheme will not have a significantly negative impact on the financial status of the Oil Fund that EFAI will continue to have legal authority to withdraw money from the Oil Fund, and that only the debentureholders’ representative will have the legal right to withdraw funds from the escrow account to service the third series of senior bonds of EFAI.
TRIS Rating reported that the National Energy Policy Council (NEPC) resolution dated 25 August 2005 regarding the issuance of debt by EFAI clearly reflects the government’s intention to ensure that EFAI will have sufficient cash to service its debt obligations. NEPC resolved to support the efforts of the Committee on Energy Policy Administration (CEPA) to manage 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.
After CEPA’s October 2006 resolution to increase the ceiling on contribution rates for gasoline, gasohol and diesel from Bt2.50 per liter to Bt4.00 per liter, the ULG 95R contribution rate fluctuated between Bt3.46-Bt4.00 per liter in 2007, and the ULG 91R contribution rate ranged between Bt3.26-Bt3.70 per liter. The relatively high contribution rates set by CEPA resulted in an increase in Oil Fund revenue from Bt42,032 million (Bt3,503 million per month) in fiscal year 2006 to Bt50,923 million (Bt4,244 million per month) in fiscal year 2007, even though consumption decreased from 36,322.9 million liters to 34,988.4 million liters. This clearly demonstrates the government’s intention to strengthen the Oil Fund’s financial position and to support EFAI’s ability to meet and prepay its debt payment. EFAI prepaid all outstanding bank loans in August 2007. As of November 2007, EFAI had only Bt8,800 million of senior bonds that will mature in October 2008 (the third series of senior bonds) and EFAI has fully funded the cash reserve of Bt9,317 million (principal and interest) in the escrow account.
According to the indenture’s terms and conditions, the escrow agent, who is also the bondholders’ representative, is the only party authorized to withdraw money from the escrow account and only for the purpose of repaying principal or interest or for any other purposes that will benefit the senior bondholders. However, the contribution rate for gasohol 95 was gradually reduced from Bt1.50 per liter to Bt0.30 per liter, while the contribution rate of diesel was set at Bt1.50 per liter, before being gradually reduced to Bt0.10 per liter in January 2008. The diesel oil price has been subsidized for Bt0.30 per liter from Oil Fund since March 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 subsidies paid by the Oil Fund. In addition, the government is not legally bound to repay or guarantee EFAI’s debts. -- End
The Energy Fund Administration Institute (EFAI)
Issue Rating: Upgraded to AA from AA-
Rating Outlook: Stable
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Copyright 2008, 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 ESOPreflects TRIS Rating’s expectation that EFAI will continue to receive strong government support. The outlook is also based on the expectation that the current oil price subsidy scheme will not have a significantly negative impact on the financial status of the Oil Fund that EFAI will continue to have legal authority to withdraw money from the Oil Fund, and that only the debentureholders’ representative will have the legal right to withdraw funds from the escrow account to service the third series of senior bonds of EFAI.
TRIS Rating reported that the National Energy Policy Council (NEPC) resolution dated 25 August 2005 regarding the issuance of debt by EFAI clearly reflects the government’s intention to ensure that EFAI will have sufficient cash to service its debt obligations. NEPC resolved to support the efforts of the Committee on Energy Policy Administration (CEPA) to manage 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.
After CEPA’s October 2006 resolution to increase the ceiling on contribution rates for gasoline, gasohol and diesel from Bt2.50 per liter to Bt4.00 per liter, the ULG 95R contribution rate fluctuated between Bt3.46-Bt4.00 per liter in 2007, and the ULG 91R contribution rate ranged between Bt3.26-Bt3.70 per liter. The relatively high contribution rates set by CEPA resulted in an increase in Oil Fund revenue from Bt42,032 million (Bt3,503 million per month) in fiscal year 2006 to Bt50,923 million (Bt4,244 million per month) in fiscal year 2007, even though consumption decreased from 36,322.9 million liters to 34,988.4 million liters. This clearly demonstrates the government’s intention to strengthen the Oil Fund’s financial position and to support EFAI’s ability to meet and prepay its debt payment. EFAI prepaid all outstanding bank loans in August 2007. As of November 2007, EFAI had only Bt8,800 million of senior bonds that will mature in October 2008 (the third series of senior bonds) and EFAI has fully funded the cash reserve of Bt9,317 million (principal and interest) in the escrow account.
According to the indenture’s terms and conditions, the escrow agent, who is also the bondholders’ representative, is the only party authorized to withdraw money from the escrow account and only for the purpose of repaying principal or interest or for any other purposes that will benefit the senior bondholders. However, the contribution rate for gasohol 95 was gradually reduced from Bt1.50 per liter to Bt0.30 per liter, while the contribution rate of diesel was set at Bt1.50 per liter, before being gradually reduced to Bt0.10 per liter in January 2008. The diesel oil price has been subsidized for Bt0.30 per liter from Oil Fund since March 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 subsidies paid by the Oil Fund. In addition, the government is not legally bound to repay or guarantee EFAI’s debts. -- End
The Energy Fund Administration Institute (EFAI)
Issue Rating: Upgraded to AA from AA-
Rating Outlook: Stable
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Copyright 2008, 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.