Bangkok--27 Feb--TRIS Rating
TRIS Rating Co., Ltd. has upgraded the company rating of Bangkok Expressway PLC (BECL) to “A” from “A-” with “stable” outlook. The rating reflects the continuous increase in traffic volume on the expressways despite the rising popularity of the mass transit systems, stable cash flow generation supported by established traffic volume, the benefit of being the only toll road system linked to the First Stage Expressway System (FES) to form a comprehensive road network for Bangkok, and the proven track record of management. The rating also takes into consideration the company’s current debt profile, which is structured to match debt servicing obligations with internal cash generation until debts mature. These strengths are partially offset by high leverage, uncertainty over future government transportation policies, and the government’s potential intervention in toll adjustments.
The “stable” outlook reflects the expectation that the traffic on the expressways will remain strong, which will in turn produce BECL’s sufficient debt service coverage from annual revenue. TRIS Rating also expects the company to maintain good service and conditions on toll roads to attract new commuters. In addition, should the company decide to explore new business opportunities, its financial structure should not deteriorate from the current position.
TRIS Rating reported that BECL built and operates the elevated Si Rat Expressway (The Second Stage Expressway System or the SES) and its various extensions under 30-year Build-Transfer-Operate (BTO) concessions from the Expressway and Rapid Transit Authority of Thailand (ETA). The SES was constructed as a six-lane elevated expressway for a total length of approximately 38.5 kilometers (km.). The SES comprises four sectors linked to the FES, which was constructed and has been operated by the ETA. The roads form a city ring road, with routes to the north, east, southeast and southwest, creating a comprehensive road network for Bangkok residents that provides an alternative to the heavily congested free roads within central Bangkok and the suburbs. In addition, BECL incorporated a subsidiary, Northern Bangkok Expressway Co., Ltd. (NECL), to carry out construction and management of the Udon Ratthaya Expressway (Bang Pa In-Pak Kret Expressway), known as SES Sector C+, for a total length of 32 km. under a 30-year BTO concession with the ETA. BECL currently holds 53.33% of NECL’s registered capital.
TRIS Rating said, BECL’s financial performance depends on traffic volume on the expressways, the toll rate, and operating costs. Traffic volume on the expressways has continuously increased during the past few years despite the tremendous increase in gasoline prices during 2005-2006. Traffic volume rose by 2.29% in 2005 and 3.45% in 2006 to an average of 944,572 cars per day, compared with an average of 913,098 cars per day in 2005. TRIS Rating expects that the continuous growth of the Thai economy, the expansion of residential housing into the areas surrounding the city, and heavy traffic congestion on free roads from construction of mass transit systems will continue to support demand for toll roads in the future. BECL's operating performance is expected to remain sound due to continued traffic growth, toll rate adjustments even at moderate levels, and the management team’s ability to conservatively manage operating costs.
BECL is a cash-generating company. The company had an average daily cash inflow (after sharing with the ETA) of Bt19 million in 2006, compared with Bt18.4 million in 2005. BECL’s indebtedness is a long-term syndicated loan that will fully amortize in 2016, which is in line with the company’s cash generating capacity. The company’s outstanding debt as of December 2006 stood at Bt28,383 million. Until 2008, debt servicing obligations are predictable as most of the interest rates are fixed and repayment schedules are well structured to match the company’s internal cash generation. However, starting from September 2008, the interest rate on the existing syndicated loan will float at MLR-2%. The funds from operations (FFO) to total debt ratio for the first nine months of 2006 was 10.59%, better than 9.52% for the same period of 2005. Though BECL’s leverage is quite high, it is mitigated by relatively stable and predictable cash flow generation supported by established traffic volume, said TRIS Rating.