TRIS Rating Affirms Ratings of “AA-/Stable” to “RATCH”and “AA/Stable” to “RATCHGEN” and Secured Debentures

TRIS Rating has also affirmed the company rating of RATCHGEN and the rating of its senior secured debentures at “AA” with “stable” outlook. The ratings reflect RATCHGEN’s stable cash flow from the well-structured and state-of-the-art Ratchaburi power plants, long experience in the power sector, and proven record of managing power plants. New power plants and a decline in electricity demand have lowered RATCHGEN’s dispatch level, but this has had a minimal impact on cash flow. The “stable” outlook reflects TRIS Rating’s expectation that RATCHGEN will continue to receive stable cash flows from the Ratchaburi power plant. The power units are expected to maintain availability and operating performance in line with the PPA targets.

TRIS Rating reported that RATCH was established in 2000 as a holding company to purchase the Ratchaburi power plant from the Electricity Generating Authority of Thailand (EGAT). As of September 2009, EGAT held a 45% stake in RATCH, followed by the BANPU Group (14.99%). Currently, RATCH’s power portfolio comprises four operating power plants with total electricity generating capacity of 4,347 megawatts (MW). As of December 2009, RATCH’s investments in those power plants totaled Bt21,970 million. In 2009, RATCH received dividend income of Bt5,921 million from its power plant investment. RATCHGEN remained the major dividend contributor, constituting 96% of RATCH’s dividend income. Ratchaburi Power Co., Ltd. (RPCL), another IPP project in the RATCH portfolio, successfully started commercial operation in 2008. RPCL reported a net profit of Bt3,622 million in 2009 compared with Bt2,573 million in 2008. RPCL is expected to pay dividends of Bt350-Bt700 million per year to RATCH, starting in 2010. Therefore, contribution from RPCL will increase to 15% of total dividend income of RATCH in the future.

TRIS Rating said about the Hongsa project, which is the joint venture of RATCH, Banpu Power Co., Ltd. and Lao Holding State Enterprise, that it progresses well. The project comprises a lignite-fired power project (1,878 MW) and a lignite mining project in Lao PDR. The tariff memorandum of understanding (MOU) with EGAT was signed on 13 May 2009, while the power concession and mining concession were granted by the Government of Lao PDR on 30 November 2009. The project is expected to commence construction by the end of 2010 and the commercial operation date (COD) is targeted for 2015.

RATCH’s investment policy has been conservative. All power plants in its portfolio have long-term power purchase agreements (PPAs) with EGAT. Because both GDP and electricity consumption in Thailand were lower than expectations in 2008-2009, the National Energy Policy Council (NEPC) is revising the current PDP (PDP2007: Revision 2) to reflect the current situation of the Thai economy and demand for electricity. The revision may limit investment potential of power business in Thailand. To pursue the company’s growth strategy, RATCH aims to seek investment opportunities in power and power-related businesses in Thailand and other countries.

TRIS Rating said about RATCHGEN that it is a wholly-owned subsidiary of RATCH, which is 45% owned by EGAT. RATCHGEN is the largest IPP in Thailand. Its power plants consist of two thermal units and three combined cycle gas turbine (CCGT) units with total installed capacity of 3,645 megawatts (MW), representing 12.5% of Thailand’s total installed capacity as of December 2009. EGAT has 25-year power purchase agreements (PPAs) with RATCHGEN, while PTT PLC has a 25-year gas sale agreement (GSA) with the company.

In 2009, the performance of the CCGT units continued to outperform the target, reaching an average plant availability level of 87.4% and a heat rate of 7,214 BTU/kWh. The thermal units can maintain average availability as high as 87.2% with a heat rate of 10,071 BTU/kWh. However, the net electricity output for all units in 2009 declined by 25% to 12,298 GWh. The drop was due to a weak demand for electricity throughout the country and a decline dispatch order from EGAT resulting from the new power plants coming into the system. However, such drop has not affected its net profit which is derived mainly from the Availability Payment (AP).

Electricity sales in 2009 decreased by 16% to Bt35,313 million. The drop mainly came from a 24% decline in Energy Payment (EP) and 25% drop in electricity output order from EGAT. The AP, however, increased by 2% as the plants was able to maintain their availability better than their targets. RATCHGEN’s net profit in 2009 was relatively maintained at Bt5,015 million. The earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage increased from 7.6 times in 2008 to 11.1 times in 2009, partly resulted from its successful interest rate reduction in 2009. The debt service coverage ratio (DSCR), excluding changes in reserve accounts and working capital, was healthy at 2.1 times as of December 2009, said TRIS Rating. -- End

Ratchaburi Electricity Generating Holding PLC (RATCH)

Company Rating: Affirmed at AA-

Rating Outlook: Stable

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