The ratings take into consideration WHAUP's position as the sole utility service provider in the leading industrial estates of Thailand, recurring income from the sale of utility services, and dividend income WHAUP received from its investment in the power segment. The ratings also incorporate rising leverage from new projects in pipelines both in Thailand and overseas.
WHAUP's operating performance remains healthy. For the first quarter of 2018, revenue grew by 8.8% to Bt422 million compared with the same period last year. The rise was due to an increase in the volume of utility services sold to existing customers and new power plants. The operating profit margin before depreciation and amortization increased from 34.9% in 2017 to 43.8% in the first quarter of 2018. The increase was due to a rise in sales volume and cost control efforts.
Earnings before interest, tax, depreciation, and amortization (EBITDA) surged to Bt610 million in the first quarter of 2018, up from Bt206 million during the same period of 2017. EBITDA rose sharply because WHAUP received more equity income from the five new power plants, which started commercial operations during the past few months. In addition, GHECO-One power plant, WHAUP's largest power investment, contributed more equity income because it was operating throughout the first quarter of 2018. The plant was shut down for maintenance during the first quarter of 2017.
Total debt remained flat at Bt7,935 million as of March 2018. As a result, the total debt to capitalization ratio improved to 37.4% as of March 2018, from 38.7% in 2017. The ratio of funds from operations (FFO) to total debt also improved to 12.6% (annualized, from the trailing 12 months) in the first three months of 2018, compared with 12.1% in 2017.
The "stable" outlook reflects the expectation that WHAUP will continue to receive reliable cash flow from its resilient utility service and predictable dividend income earned from the power projects as planned. Under TRIS Rating's base case scenario, FFO is forecasted at Bt1,400-Bt1,700 million per year in 2018-2020. EBITDA is forecasted at Bt2,100-Bt2,400 million over the same period. Given the projected levels of cash flow and capital expenditures, leverage should hold at a moderate level. Over the next three years, the FFO to total debt ratio is projected to stay around 15% and the EBITDA interest coverage ratio is forecasted at 5-7 times.
As a core subsidiary of WHA, the ratings of WHAUP are aligned with WHA's credit profile. Any change in WHA's credit rating or relationship with WHA will affect WHAUP's ratings accordingly.
WHA Utilities and Power PLC (WHAUP)
WHAUP208A: Bt3,200 million senior unsecured debentures due 2020
WHAUP208B: Bt800 million senior unsecured debentures due 2020
Up to Bt5,000 million senior unsecured debentures due within 7 years