TRIS Rating Assigns Issue Rating for “RATCHGEN”at “AA” with “Stable” Outlook

TRIS Rating Co., Ltd. has assigned the rating of “AA” to the proposed issues of up to Bt12,500 million in senior debentures of Ratchaburi Electricity Generating Co., Ltd. (RATCHGEN). At the same time, TRIS Rating has affirmed the company rating of RATCHGWN at “AA” with “stable” outlook. RATCHGEN will use the proceeds from the debentures to refinance its existing loan. The ratings reflect RATCHGEN’s stable cash flow from its long- term power purchase agreements with the Electricity Generating Authority of Thailand (EGAT), the well-structured and state-of-the-art Ratchaburi power plants, as well as long experience in the power sector and proven record of power plants management. The ratings are also taken into account the lower dispatch level of RATCHGEN’s thermal units caused by the new power plants. However, this factor has had a minimal impact on the company’s cash flow.

The “stable” outlook reflects TRIS Rating’s expectation that RATCHGEN will continue to receive stable cash flows from the Ratchaburi power plants. The power units are expected to maintain availability and operating performance to be in line with the PPA targets.

TRIS Rating reported that RATCHGEN is a wholly-owned subsidiary of Ratchaburi Electricity Generating Holding PLC (RATCH), which is 45% owned by EGAT. RATCHGEN is the largest Independent Power Producer (IPP) in Thailand. Its power plant consists of two thermal units and three combined cycle gas turbine (CCGT) units with total installed capacity of 3,645 megawatts (MW), representing 12% of Thailand’s total installed capacity as of December 2010. EGAT has 25-year power purchase agreements (PPA) with RATCHGEN, while PTT PLC has a 25-year gas sale agreement (GSA) with the company.

TRIS Rating said that the CCGT units continued to outperform the targets in 2010, reaching an average plant availability level of 90.8% and a heat rate of 7,208 BTU/kWh. The thermal units could maintain an average availability level as high as 96.0% with a heat rate of 10,120 BTU/kWh. As electricity consumption has recovered since the third quarter of 2009, the net electricity output for all units in 2010 increased by 35.3% to 16,673 GWh. However, the dispatch level of RATCHGEN’s thermal units was still low at 36.0% in 2010, as a result of new power plants coming online in 2009 and 2010. The lower dispatch levels have not impacted the company’s net profit, which is derived mainly from Availability Payment (AP) revenue.

In 2010, RATCHGEN’s revenues increased by 19.2% to Bt42,104 million. Its net profit declined by 24.1% to Bt3,808 million. The decline in net profit resulted from a lower AP revenue as dictated in the PPA and higher tax expenses from the expiration of tax exemption granted as promotional privileges by the Board of Investment (BOI). In 2010, RATCHGEN’s earnings before interest, tax, depreciation and amortization (EBITDA) was healthy at Bt8,472 million. The EBITDA interest coverage ratio was 12.5 times, up from 11.1 times in 2009, partly as a result of a successful interest rate reduction in 2009. In 2010, the debt service coverage ratio (DSCR), excluding changes in reserve accounts and working capital, was healthy at 2.1 times, said TRIS Rating -- End.

Company Rating: Affirmed at AA Issue Rating: Up to Bt12,500 million senior debentures due within 2015 AA Rating Outlook: Stable ? Copyright 2011, 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. All methodologies used can be found at http://www.trisrating.com/en/rating_information/rating_criteria.html.