TRIS Rating Assigns New Issue Rating and Confirms Current Company & Issue Ratings of “BECL” at “A” with “Stable” Outlook

TRIS Rating Co., Ltd. has affirmed the company and current issue ratings of Bangkok Expressway PLC (BECL) at “A”. At the same time, TRIS Rating has assigned the rating of “A” to BECL’s proposed issue of up to Bt2,000 million in senior debentures. The outlook remains “stable”. The proceeds from the new debentures will be reserved to refinance the existing debentures due in November 2011. The ratings reflect the sustained traffic growth on BECL’s expressways, reliable operating cash flow, the benefit of being the only toll road system linked to the First Stage Expressway System (FES), and a strong management track record. These strengths are partially offset by uncertainty over future government transportation policies, the government’s potential intervention in toll rate adjustments, and the expectation of higher leverage needed to fund planned investments.

The “stable” outlook reflects the expectation that BECL’s operating performance will be satisfactory for the remaining life of each concession. BECL’s ability to generate a significant amount of free cash flow provides it with the capability to pursue investment opportunities. TRIS Rating expects that any future large capital expenditures will not affect BECL’s debt service capacity and liquidity profile.

TRIS Rating reported that BECL built and operates the elevated Si Rat Expressway (the Second Stage Expressway System or the SES) and the Udon Ratthaya Expressway (Bang Pa In-Pak Kret Expressway), known as SES Sector C+ under 30-year Build-Transfer-Operate (BTO) concessions awarded by the Expressway Authority of Thailand (EXAT). The SES, extension of SES (Sector D) and Sector C+ concessions will expire in 2020, 2027, and 2026, respectively. The SES is linked to the First Stage Expressway (FES), which was constructed and has been operated by the EXAT. 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. BECL shares revenue with EXAT on the urban network (FES, and SES Sector A and B). From March 2011 onward, the sharing ratio with EXAT changed from 50:50 to 40:60. For the suburban network and Sector C+, BECL does not share revenue with EXAT.

Traffic volume on BECL’s network has grown steadily since inception. The compound annual growth rate was 4% over the past 10 years (2000-2010). In 2010, the average daily traffic volume was 974,505 vehicles per day, up 2.3% year-on-year (y-o-y), despite political demonstrations in Bangkok. In March 2011, traffic volume hit its record high of more than one million vehicles per day. TRIS Rating expects that in the medium term, traffic volume on the expressways will continue to grow based on economic growth, a higher population in Bangkok, the expansion of residential housing into the areas surrounding the city, and heavy traffic congestion on free roads.

TRIS Rating said, BECL’s financial profile has improved continuously, supported by revenue growth, continuous reductions in debt, and lower financing costs. Funds from operations (FFO) in 2010 grew 5.2% y-o-y to Bt4,928 million. It is expected that FFO in 2011 will decline due to lower toll revenue caused by higher revenue sharing to EXAT. However, the impact will be mitigated by three factors: traffic volume growth especially on the suburban network, higher toll revenue on Sector C+ as the company reduced the toll rate discount, and lower financing expenses based on debt repayment and lower financing costs. In 2010, BECL amended the interest rate of its loans with financial institutions from a floating rate (MLR-2%) to a fixed rate (3.75% from September 2010 to June 2012 and 4% thereafter). This interest rate change could save a substantial amount of interest in light of the recent rises in interest rates. As of December 2010, the total debt to capitalization ratio improved to 51.41% from 57.29% in 2009. The earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage ratio strengthened to 6.6 times in 2010, up from 5.71 times in the prior year.

In the medium term, TRIS Rating expects BECL’s leverage will increase from the current level based on its planned investments. Currently, the company plans to invest in two new projects: a hydroelectric power plant and an expressway extension. These two projects will require approximately Bt19,000 million in capital over the next five years. The needed funds are expected to be financed with new debt. On 4 March 2011, the company purchased a 7.5% stake of Xayaburi Power Co., Ltd. (Xayaburi) from CH. Karnchang PLC in an amount of Bt60 million. Xayaburi was granted a concession to develop a hydroelectric power plant in the Lao PDR. While the power plant project is uncertain, TRIS Rating expects the company will be awarded the expressway concession contract for the Si Rat Outer Ring Road Expressway. The new expressway is an extension of the existing SES which BECL has the first right of refusal for the extension. The company will submit its bid proposal for the new expressway concession in May 2011. The bidding result is expected to be announced in the same month. Construction is due to start in 2012 and finish in 2015, said TRIS Rating. -- End

Company Rating: Affirmed at A Issue Ratings: BECL11NA: Bt2,900 million senior debentures due 2011 Affirmed at A BECL128A: Bt1,895 million senior debentures due 2012 Affirmed at A BECL139A: Bt1,000 million senior debentures due 2013 Affirmed at A BECL13NA: Bt1,100 million senior debentures due 2013 Affirmed at A BECL148A: Bt1,700 million senior debentures due 2014 Affirmed at A Up to Bt2,000 million senior debentures due within 2021 A 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.