TRIS Rating Assigns Company Rating of “EGATi” at “AAA” with “Stable” Outlook

TRIS Rating has assigned the company rating of "AAA" to EGAT International Co., Ltd. (EGATi) with “stable” outlook. The rating reflects the company's status as a core subsidiary of Electricity Generating Authority of Thailand (EGAT) to source electrical energy abroad and supply to Thailand. EGATi's rating also reflects its high degree of operational integration with EGAT and its important role in supporting EGAT's long-term strategy of providing sufficient electricity for the country. The rating takes into consideration proven record of strong support from EGAT. The rating also incorporates the important role EGATi plays as EGAT's investment arm, sourcing electrical energy abroad and supplying the energy to the domestic market.

The “stable” outlook reflects the expectation that EGATi will remain a wholly-owned subsidiary of EGAT and play an important role for EGAT to source electrical energy abroad for use in Thailand.

The downside factors for EGATi's rating are the deterioration of EGAT's credit profile, a change in EGATi's relationship with EGAT, or a reduction in support from EGAT.

EGATi was founded by a Cabinet resolution dated 30 October 2007 with an initial objective to serve as EGAT’s representative to participate in government-to-government (G-to-G) power projects in neighboring countries. Since its inception, EGATi is 100% owned by EGAT. EGAT is a major state-owned enterprise, responsible for the entire electricity generating system and the power transmission system for Thailand. As of June 2015, the power plants EGAT owns constituted 43% of the total electricity generating capacity in Thailand. EGAT has been a sole off-taker for the remaining electricity capacity owned by private power producers. EGAT also owns and operates the entire power transmission grid in Thailand. EGAT sells electrical energy in bulk to the Metropolitan Electricity Authority (MEA) and the Provincial Electricity Authority (PEA). Given its critical role in the power sector and provision under EGAT Act B.E. 2511 (1968), EGAT's credit worthiness is closely tied with the Thai government.

According to the current power development plan (PDP2015), Thailand will need to import electricity of 12,347 megawatts (MW) during 2015-2036, increasing by approximately 10,000 MW from the current level. The proportion of imported electricity capacity will significantly increase from 6% at the end of 2014 to 18% at the end of 2036. In order to secure long-term sources of electrical energy for the country, EGATi has a mission to participate in power projects in neighboring countries and supply electricity to Thailand with EGAT is the main or sole off-taker.

Currently, EGATi's investment portfolio consists of three power projects in the Lao People’s Democratic Republic (Lao PDR), Myanmar, and Vietnam. The combined generating capacity is 8,491 MW. EGATi has a policy to hold 30%-40% interest in these projects. Of the three projects, the Nam Ngiep 1 hydropower project (Nam Ngiep 1) in the Lao PDR exhibits the most progress which is expected to commence operation in 2019. Nam Ngiep 1 has an installed capacity of 291 MW. It has 27-year power purchase agreement (PPA) with EGAT to supply 1,459 gigawatt hour (GWh) to Thailand. EGATi holds a 30% stake in this project and budgeted US$84 million for its equity contribution in the project. In addition to the Nam Ngiep 1 project, EGATi has conducted feasibility studies for developing a 1,200-MW coal-fired power plant in Vietnam (Quang Tri Project) and a 7,000-MW hydro power plant in Myanmar (Mong Ton Project). Currently, EGAT received an approval from the Ministry of Energy of Thailand to make an equity contribution of Bt17,000 million to EGATi.

EGATi's operation is highly integrated with EGAT. As a wholly-owned subsidiary, EGAT continuously supports EGATi in terms of manpower, system, knowledge transfers, and the shared experiences. EGATi's management and members of the board of directors were appointed by EGAT. EGATi's operating expenses and investments are financed by EGAT.

EGATi operation is in the initial investment phase. All investments are green-field projects, which need 5 to 10 years to develop. EGATi is expected to record losses for at least three years until Nam Ngiep 1, its first investment project, commences operation in 2019.

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