Ratchaburi Electricity Generating Holding Public Co. Ltd.

The stable outlook on Ratch reflects our expectation that the company will calibrate its growth aspirations to preserve its robust capital structure over the next two years. We anticipate Ratch's relationship with and credit quality of its controlling shareholder, EGAT, will not materially change in the period. We may lower the rating if we lower the sovereign credit rating on Thailand (FC: BBB+/Stable/A-2; LC: A-/Stable/A-2), or consider that Ratch no longer benefits from indirect support from the Thai government in honoring EGAT's obligations under its PPA. We may also lower the rating by one notch if we assess Ratch's 'bbb+' stand-alone credit profile (SACP) to be weaker by up to four notches. This is dependent on our expectations that EGAT

...Ratch is likely to maintain good visibility over cash flow due to power purchase agreements (PPAs). The company has a long-term PPA with Thailand's dominant electricity producer, Electricity Generating Authority of Thailand (EGAT), and this should sustain its EBITDA over the next couple of years. However, due to gradual structural decline in availability payments, growth will be dependent on new capacity additions that come onstream from 2021. We expect Ratch to maintain moderate leverage. The company's capacity expansion plans, with elevated spending, will put some pressure on cash flows. However, we believe Ratch's balance-sheet management will be sufficiently prudent to protect its credit profile over 2018-2020. We forecast a ratio of funds from operations (FFO) to debt at 37%-40% over 2019-2020, and anticipate the debt-to-EBITDA ratio will trend up to 2.0x....

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