Bangkok, Thailand – TRIS Rating has reaffirmed the “AAA” credit rating for EGAT International Co., Ltd. (EGATi), the overseas investment arm of the Electricity Generating Authority of Thailand (EGAT), with a stable outlook. The rating underscores EGATi’s critical role in EGAT’s international expansion strategy and its robust financial standing.
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The rating agency emphasized EGATi’s position as a core subsidiary of EGAT, highlighting its strategic importance in driving EGAT’s investments in power and energy projects abroad. The close alignment between the two entities,evidenced by shared leadership and a 99.9% ownership stake by EGAT, further solidifies EGATi’s significance. The company’s focus on government-to-government (G-to-G) projects ensures a stable power supply and attractive returns on investment for EGAT.
The report also acknowledged EGATi’s high level of integration with its parent company. The majority of EGATi’s board members and senior executives are seconded from EGAT, and EGAT has a direct influence on EGATi’s strategic,financial, and investment decisions. This close relationship ensures alignment with EGAT’s broader growth objectives.
TRIS Rating expects EGATi to receive strong support from the Thai government through EGAT if needed, given its integral role in EGAT’s long-term plans. This support is already evident in EGAT’s commitment to provide THB17 billion in equity contributions for EGATi’s investments.
Dividend Income and Investment Strategy
The rating agency noted that EGATi’s investment in PT Adaro Indonesia (Adaro), a major Indonesian coal mining company, continues to generate significant dividend income. Since 2016, EGATi has received substantial dividends from Adaro, thanks to the latter’s strong performance during coal price upcycles. The dividend income remains a crucial source of funding for EGATi’s new ventures.
While acknowledging the benefits of the Adaro investment, TRIS Rating also pointed out the risks associated with coal price volatility, the cyclical nature of the coal industry, and regulatory changes in Indonesia. These factors could impact Adaro’s long-term performance and, consequently, EGATi’s future dividend income. Moreover, the concentration risk from this investment, which accounts for 76% of EGATi’s total equity investments, remains a concern.
EGATi plans to diversify its portfolio to mitigate concentration risk and improve earnings stability. The company aims to invest THB26 billion between 2024 and 2028, targeting a 60:40 split between power generation and non-power generation assets. In power generation, the goal is to add 800 megawatts (MW) of new equity capacity, with at least 50% from renewable sources. Non-power generation investments will focus on new S-curve businesses such as hydrogen fuel,electric vehicle (EV) components, battery value chains, and an electricity trading platform.
Challenges and Financial Outlook
TRIS Rating observed that EGATi’s project development has been slower than anticipated due to a complex approval process and economic uncertainties in target countries. The delay in appointing EGAT’s Governor and Board of Directors during the 2023 government transition and the economic downturn in Laos have contributed to these delays.
Despite these challenges, EGATi’s financial profile remains strong. The company has THB11.4 billion in cash reserves,THB5.2 billion in remaining equity commitments from EGAT, and robust dividend inflows from Adaro. These resources are expected to adequately support EGATi’s planned investments while maintaining very strong credit metrics.
The “stable” outlook assigned to EGATi reflects the stable outlook for EGAT. TRIS Rating expects EGATi to maintain its core subsidiary status and continue playing a vital role in EGAT’s international growth strategy.
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