TRIS Rating Assigns “BBB+/Positive” Rating to Senior Unsecured Debt Worth Up to Bt6,000 Million of “TPIPL”, Replacing Recent Debt of Up to Bt5,000 Million

TRIS Rating affirms the company rating on TPI Polene PLC (TPIPL) and the issue ratings on its outstanding senior unsecured debentures at “BBB+” with a “positive” outlook. At the same time, TRIS Rating assigns a rating of “BBB+” to TPIPL’s newly proposed issue of up to Bt6 billion in senior unsecured debentures. The assigned issue rating replaces the rating on the proposed issue of up to Bt5 billion announced on 10 April 2019, as the company decided to increase the issue size. The proceeds from the new debentures will be used to refinance outstanding debentures and bank loans.

The ratings continue to reflect TPIPL’s strong market position in the Thai cement market, diversified sources of revenue, and material cash flows from the power generating segment. However, these strengths are offset by the cyclicality of the cement and plastics industry as well as the operational risks inherent in refuse-derived fuel (RDF) power plants. The ratings are also constrained by TPIPL’s concentrated source of borrowings and refinancing risk.

TRIS Rating maintains the view that TPIPL’s performance will gradually improve, backed by the recovery of its cement business, enlarging cash flow, and stronger profitability once its new power plants are fully operational. New investment cycle may cause rising leverage but we believe that growing cash flow enable the company to handle the rise in debt. We expect TPIPL’s debt to earnings before interest, tax, depreciation, and amortization (EBITDA) ratio will steadily decline towards 6 times over the next three years.

TRIS Rating notes that TPIPL’s liquidity profile shows its heavy dependence on debenture issuances as a major source of financing and its refinancing risk in 2021. Since a series of outstanding debentures totaling Bt17.2 billion will be due in 2021, we expect TPIPL’s key management will take a proactive approach to smooth out the refinancing.

RATING OUTLOOK

The “positive” outlook reflects TRIS Rating’s expectation that TPIPL’s financial profile will improve further, with a potential recovery of its cement business and a larger portion of predictable cash flows from the power segment. TRIS Rating expects that TPIPL’s competitive positions in the cement and plastic businesses will remain, whilst its power business will continue to exhibit satisfactory performance and remain the largest cash flow contributor. Given the enhanced cash flow, the debt to EBITDA ratio should steadily decline.

RATING SENSITIVITIES

The ratings could be upgraded if TPIPL’s cement business recovers significantly and the power plants generate sizable cash flow while there are material cost savings as planned. A rating upgrade could also occur if the debt to EBITDA ratio falls below 6 times for a sustained period and TPIPL diversifies its sources of borrowings.

The ratings and/or outlook could be revised downward if TPIPL’s financial profile deteriorates significantly. This could happen from weaker-than-expected performance of the power plants and/or excessive debt-financed investments. A large equity loss from pending legal claims is another key factor that could trigger a negative rating action.

TPIPL198A: Bt2,750 million senior unsecured debentures due 2019 BBB+ TPIPL201A: Bt3,000 million senior unsecured debentures due 2020 BBB+ TPIPL207A: Bt2,000 million senior unsecured debentures due 2020 BBB+ TPIPL208A: Bt2,205 million senior unsecured debentures due 2020 BBB+ TPIPL214A: Bt1,600 million senior unsecured debentures due 2021 BBB+ TPIPL214B: Bt8,000 million senior unsecured debentures due 2021 BBB+ TPIPL218A: Bt3,600 million senior unsecured debentures due 2021 BBB+ TPIPL221A: Bt3,530 million senior unsecured debentures due 2022 BBB+ TPIPL224A: Bt1,200 million senior unsecured debentures due 2022 BBB+ TPIPL228A: Bt4,000 million senior unsecured debentures due 2022 BBB+ TPIPL234A: Bt2,645 million senior unsecured debentures due 2023 BBB+ Up to Bt6,000 million senior unsecured debentures due within 6 years BBB+ Rating Outlook: Positive TRIS Rating Co., Ltd./www.trisrating.com Contact: [email protected], Tel: 0-2098-3000/Silom Complex Building, 24th Floor, 191 Silom Road, Bangkok 10500, Thailand ? Copyright 2019, 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, without the prior written permission of TRIS Rating Co., Ltd. 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.