TRIS Rating Affirms “AA-/Stable” Rating to “KEGCO’s” Secured Debentures

TRIS Rating Co., Ltd. has affirmed the rating of the senior secured debentures of Khanom Electricity Generating Co., Ltd. (KEGCO) at “AA-” with “stable” outlook. The rating reflects the company’s solid project fundamentals, strategic position as a major base load generator in Thailand’s southern region, and proven operational track record. Declining demand for electricity may lower KEGCO’s dispatch level. However, it has no immediate impact on the company’s cash flow because most revenues are generated from availability payments, not energy payments.

The “stable” outlook reflects TRIS Rating’s expectation that the Khanom power plant will continue to achieve its performance targets and will generate stable revenues to KEGCO through electricity sales.

TRIS Rating reported that KEGCO was established in 1995 to buy the 824-megawatt (MW) Khanom power plant from the Electricity Generating Authority of Thailand (EGAT) under EGAT’s privatization plan. KEGCO is a wholly-owned subsidiary of the Electricity Generating PLC (EGCO), which is 25.4% owned by EGAT. The power station is located in Nakorn Sri Thammarat province in southern Thailand. It consists of two barge-mounted thermal plants (150 MW) and a combined cycle gas turbine (674 MW).

The 15- to 20-year power purchase agreement (PPA) between EGAT and KEGCO is well- structured. The pay-if-available payment commitment mitigates KEGCO’s demand risk while the cost-plus basis of the tariff structure reduces KEGCO’s price risk. KEGCO’s competitive advantage stems from its position as a major base load generator in the southern part of Thailand, which has increasing prospects for electricity consumption. KEGCO supplied approximately 50% of total electricity demand in the southern region during 2005-2007. Over the years, KEGCO’s operating performance has been satisfactory. The availability and plant heat rates since the start of operation have met the performance targets specified in the PPA. The combination of proven technology and experienced staff reduces technology and operating risks. A pass-through component in the energy payment structure limits KEGCO’s exposure to fuel price risk.

TRIS Rating said, KEGCO’s operating performance during the first nine months of 2008 was satisfactory. The company maintained the power plant availability factor as high as 92.8%. Electricity sales dropped from Bt5,273 million in 2006 to Bt4,235 million in 2007 and Bt2,581 million for the first nine months of 2008 in accordance with the PPA target. The level of outstanding debt fell to Bt2,635 million as of September 2008, and the total debt to capitalization ratio continuously improved from 47.7% in 2006 to 31.9% at the end of September 2008. KEGCO’s debt service coverage ratio, as adjusted with the inclusion of the reserve account and working capital investment, was 1.45 times as of September 2008. -- End

KEGCO#1: Bt7,500 million senior secured debentures due 2011 Affirmed at AA- Rating Outlook: Stable Copyright 2009, 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.

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