Bangkok--19 Jan--TRIS Rating
TRIS Rating Co., Ltd. has affirmed the rating of Bt7,500 million senior secured debentures (KEGCO#1) of Khanom Electricity Generating Co., Ltd. (KEGCO) at “AA-” with “stable” outlook. The rating reflects KEGCO’s solid project fundamentals, its strategic position as a major base load generator in Thailand’s southern region and its proven operational track record. However, these strengths are partially offset by uncertainty about the deregulation of the power industry.
The “stable” outlook reflects TRIS Rating’s expectation that KEGCO will continue to receive stable cash flow from electricity sales from its power plants. All units of the Khanom power plant are expected to continue to achieve their performance targets.
TRIS Rating reported that KEGCO was established in 1995 to buy the 824-megawatt (MW) Khanom power plant from the Electricity Generating Authority of Thailand (EGAT) under EGAT’s privatization plan. KEGCO is a wholly-owned subsidiary of the Electricity Generating PLC (EGCO), which is 25.4% owned by EGAT. The power plant is located in Nakorn Sri Thammarat province in southern Thailand. It consists of two barge-mounted thermal plants (150 MW) and a combined cycle gas
turbine (674 MW).
TRIS Rating said, the 15- to 20-year power purchase agreement (PPA) between EGAT and KEGCO is well-structured. The pay-if-available payment commitment mitigates KEGCO’s demand risk while the cost-plus basis tariff structure reduces KEGCO’s price risk. Competitive advantages stem from the company’s key location in an area with increasing demand for electricity and its base load generation, which supplies about 60% of total demand in the southern region. KEGCO’s operating performance has been satisfactory. Its availability and plant heat rates since the start of operations
have met performance targets specified in the PPA. The proven technology combined with experienced staff reduces technology and operating risks. A pass-through component in the energy payment structure limits KEGCO’s exposure to fuel risk.
TRIS Rating also said that since EGAT is the sole purchaser, KEGCO’s credit rating is constrained by EGAT’s credit quality. Currently, EGAT’s privatization has been suspended by the Supreme Administrative Court and EGAT remains a state-owned enterprise, wholly owned by the government.
KEGCO’s 2005 financial performance was satisfactory because the company maintained its power plant availability factor as high as 94.9%. Electricity sales rose from Bt4,224 million in 2004 to Bt4,339 million in 2005 and Bt4,188 million for the first nine months of 2006. The level of outstanding debt has fallen to Bt6,752 million as of September 2006. The total debt to capitalization ratio has continuously improved from 61.5% in 2004 to 52.8% at the end of September 2006. KEGCO’s debt service coverage ratio of 1.32 times in 2005 was far higher than its minimum requirement of 1.1 times, said TRIS Rating. --