Ratch Group Public Co. Ltd.

We recognize that the company has been prudent in exercising financial discipline and managing a conservative balance sheet. Ratch's decisions on spending and capital management over the next three years, which are within the company's direct control, will underpin its risk appetite. The rating on the company may face downside risks if management prioritizes growth opportunities over deleveraging prospects. The negative outlook reflects the risk that Ratch's debt-to-EBITDA ratio could stay above 3.0x over the next 12-18 months, owing to the company's elevated spending plans and growth aspirations. We may lower the rating on Ratch if the company's debt-to-EBITDA ratio remains above 3.0x and persistently negative free operating cash flows prevents meaningful deleveraging. This could happen if: Ratch continues to

...Ratch Group Public Co. Ltd.'s leverage will likely increase over the next two years as it continues to pursue debt-funded growth spending. We believe Ratch will actively pursue growth opportunities. This is in line with its plan of achieving a capacity of 10,000 megawatts (MW) over the next three to five years, compared with the company's current committed capacity of 8,178 MW. As such, we expect higher leverage and forecast the company's debt-to-EBITDA ratio will increase to 3.5x in 2021 and 3.1x in 2022, from our estimate of about 3.0x at end-2020. This is higher than our previous expectation of a debt-to-EBITDA ratio of 2.5x-2.7x over the period. We believe the increase in Ratch's leverage tolerance will weigh on the rating. In our opinion, the company could be comfortable operating at a debt-to-EBITDA ratio of above 3.0x, as it scales up and executes its growth aspirations. Ratch's appetite for higher investments and rising leverage reflect an increase in leverage tolerance---a departure...

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