Tris Rating has affirmed the company rating of Egat International Co (EGATi), a wholly owned subsidiary of the Electricity Generating Authority of Thailand (Egat), at AAA, reflecting its important role as an investment arm of Egat for investments in power and energy-related business abroad.
The rating also takes into consideration the high integration between Egat and EGATi and strong support from Egat. EGATi's credit profile is closely linked with Egat's.
Since its inception, EGATi's business direction has been to support Egat's business strategy. EGATi has been Egat's representative in government-to-government (G-to-G) power projects in neighbouring countries.
EGATi's investment portfolio consists of three power projects abroad and investment in Adaro Indonesia, a coal mine.
The three power projects have aggregate capacity of 4,259 megawatts, consisting of the Nam Ngiep 1 hydropower project (Nam Ngiep 1) in Laos, the Quang Tri 1 coal-fired power project in Vietnam and the Mong Ton hydropower project in Myanmar.
The Nam Ngiep 1 project in Laos, worth US$906 million, is targeted to start operations in February 2019, with an installed capacity of 289MW. EGATi holds a 30% stake in the project. The other shareholders are Kansai Electric Power Company (45%) and Lao Holding State Enterprise (25%).
EGATi expects to receive a dividend of 200-300 million baht a year after the first full year of operations.
Investment return from Adaro Indonesia will continue to be the main source of revenue for EGATi over the next three years.
EGATi has an 11.53% stake in Adaro Indonesia with an investment cost of $325 million. Adaro Indonesia is one of the largest coal mining enterprises in Indonesia, with a coal production of 50 million tonnes a year and proven coal reserves of 837 million tonnes at the end of December 2017.
Investment return from Adaro Indonesia will continue to be the main source of revenue for EGATi over the next three years.
Since the initial investment in Adaro Indonesia in late 2016, the company has received dividend income of 4.49 billion baht from Adaro Indonesia.
Tris forecasts that EGATi will receive dividends of 600 million baht a year from the Indonesian coal mine during 2019 and 2020, based on current coal prices. This dividend income is sufficient to cover the company's operating expenses of 200 million baht a year.
Tris believes that Egat will continue to provide strong support to EGATi. EGATi is an integral part of Egat's long-term business strategy.
Egat has budgeted an equity contribution of 17 billion baht to support EGATi's investment plan. As of March 2018, Egat had made an equity contribution of 12.19 billion baht to EGATi, of which 11.3 billion was earmarked for investment in Nam Ngiep 1, Mong Ton, Quang Tri 1 and Adaro Indonesia.