TRIS Rating Affirms Company Rating and Outlook of “RATCHGEN” at “AAA/Stable”

TRIS Rating has affirmed the company rating of Ratchaburi Electricity Generating Co., Ltd. (RATCHGEN) at “AAA” with “stable” outlook. The rating continues to reflect the predictable cash flows RATCHGEN receives from its long-term power purchase agreements (PPAs) with the Electricity Generating Authority of Thailand (EGAT), the state-of-the-art Ratchaburi and Tri Energy power plants, as well as the company’s proven record of managing power plants.

The “stable” outlook reflects TRIS Rating’s expectation that RATCHGEN will maintain the availability of its plants and keep its operating performance in line with the PPA targets. TRIS Rating also expects RATCHGEN to generate reliable streams of revenue throughout the life of the PPAs, which will end in 2025-2027.

The credit rating downside may occur if RATCHGEN’s financial leverage increases dramatically due to any large-scale, debt-funded investment.

RATCHGEN is a wholly-owned subsidiary of Ratchaburi Electricity Generating Holding PLC (RATCH) which is rated “AAA” by TRIS Rating. RATCHGEN is the largest Independent Power Producer (IPP) in Thailand. At the end of March 2016, RATCHGEN owned and operated two power plants located in Ratchaburi province, with a total capacity of 4,345 megawatts (MW). The two plants account for 10% of Thailand’s total installed capacity. The Ratchaburi power plant consists of two thermal units and three combined cycle gas turbine (CCGT) units, with a total installed capacity of 3,645 MW. The 700-MW Tri Energy power plant was transferred to RATCHGEN on 1 August 2014. The Ratchaburi power plant sells electricity to EGAT under 25-year PPAs and buys natural gas from PTT PLC (PTT) under a 25-year gas sale agreement (GSA). The Tri Energy power plant holds a 20-year PPA with EGAT and a 20-year GSA with PTT.

The state-of-the-art nature of RATCHGEN’s power plants, its proven ability to manage and operate power plants meant its plants outperform their targets as specified in PPAs. In 2015, the equivalent availability factor (EAF) of the thermal units at the Ratchaburi power plant was 87.3%, better than the PPA target of 85.0%. The heat rate of the thermal units was 9,947 BTU/kWh (British thermal units per kilowatt hour), in line with the PPA target. The CCGT units also outperformed the targets set in the PPA, reaching an average plant availability level of 84.3% and a heat rate of 7,137 BTU/kWh. For the first three months of 2016, the Ratchaburi power plants continued to beat the PPA targets. The EAF of the thermal units was 98.7%, higher than the PPA target of 95.5%, while the heat rate was 9,934 BTU/kWh. The EAF of the CCGT units was 91.9%, better than the target of 88.5%. The heat rate for the CCGT units was 7,140 BTU/kWh. The high EAF indicates Ratchaburi power plant realized the full amount of the Availability Payment (AP). However, some technical issues at the Tri Energy power plant caused it to fall below the operating targets. The EAF of the Tri Energy power plant was 64.2% in 2015 and 58.5% for the first three months of 2016. The plant heat rate was 7,204 BTU/kWh in 2015 and 7,233 BTU/kWh for the first three months of 2016. However, the lower-than-expected performance of the Tri Energy power plant did not hurt RATCHGEN’s overall performance much. The Tri Energy plant makes a fairly small contribution to RATCHGEN’s overall performance.

In 2015, RATCHGEN’s revenue was Bt54,618 million, rising by 12%, mainly because it generated more power and had full-year contribution from the Tri Energy power plant. For the first three months of 2016, RATCHGEN’s revenue was Bt12,579 million. RATCHGEN’s capital structure is strong. At the end of March 2016, the company’s total debt was Bt7,640 million, with a total debt to capitalization ratio of 22.2%. The total debt consists of short-term loan from RATCH worth about Bt5,660 million, plus debentures of Bt2,000 million, issued in 2015. RATCHGEN’s cash flow protection is very strong. For the first three months of 2016, the earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage ratio was 26.8 times, while the ratio of funds from operations (FFO) to total debt was 87.4%.

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