TRIS Affirms “A+/Stable” Rating on BANPU, Reflecting a Leading Position in Coal Industry

TRIS Rating affirmed the company rating on Banpu Public Company Limited (BANPU) and the ratings on its senior unsecured debentures at A+. TRIS Rating also affirmed the rating on BANPUs proposed issues of up to THB4 billion in subordinated capital debentures (hybrid debentures) and the additional greenshoe portion of up to THB2 billion, announced on 27 February 2020, at A-. The rating outlook remained stable.

 

At the same time, TRIS Rating assigned the rating of A+ to BANPUs proposed issue of up to THB3 billion in senior unsecured debentures and the additional greenshoe portion of up to THB2 billion. The proceeds from the new debentures will be used for refinancing its existing debts and for its working capital.

 

The ratings continued to reflect the company’s leading position in the coal industry in the Asia-Pacific region, reliable stream of income from its power business, and strategic move to focus more on green energy. The ratings took into consideration coal price volatility and factor in the slowdown in demand for coal in the long term, driven in part by efforts to reduce emissions worldwide.

 

The stable outlook reflected the expectation of TRIS Rating that BANPU will maintain its leading position in the coal industry. Dividends from the steady power business and greater contribution from the gas business will provide some cushion for the company. TRIS Rating also expected the company’s strong liquidity, underpinned by its financial discipline and prudent cash management, to help it weather the volatile market conditions.

 

An upside for BANPUs ratings is limited over the next 12-18 months, but could occur if the company improved its financial profile significantly or exhibited greater earnings stability. A rating downgrade scenario could emerge if BANPUs performance materially deviated from our forecast, induced by the coal prices and gas prices falling significantly short of the expected levels. Any additional debt-funded investments, which significantly weaken the capital structure and cash flow protection for an extended period, could also be a factor leading to a rating downgrade.