Plans for Global Power Synergy Plc (GPSC) to invest in an energy recovery unit (ERU) project will not have an immediate impact on GPSC's rating, according to Fitch Ratings.
The ERU is a 250-megawatt thermal power plant that is part of the clean fuel project (CFP) at Thai Oil Plc (TOP).
The rating remains on rating watch negative (RWN) as a result of the pending acquisition of Glow Energy Plc.
Fitch said the new investment may put additional pressure on GPSC's financial profile because it plans to finance the investment via debt.
However, the project will buoy GPSC's business profile and improve operational ties between the company and PTT Group, the ratings agency said. Both GPSC and TOP are majority-owned by state-backed PTT Plc.
GPSC's A+(tha) national long-term rating will remain on RWN until the acquisition of Glow is complete and there is more clarity on the financial implications of the deal.
Fitch expects GPSC to finance its total investment of up to US$757 million in the ERU with more debt, but the investment is likely to improve GPSC's business profile by diversifying its assets.
According to Fitch, GPSC should benefit from the high-quality cash flow from the project, as all revenue is derived from contracted power and steam sales to the sole off-taker, TOP.
The contracts protect the company against volume and fuel supply risk, as the project receives capacity payment based on its ability to maintain the power plant's availability to TOP, regardless of the amount of energy generation. Fuel and variable costs are fully passed through to TOP. Construction of the ERU is likely to be completed in the third quarter of 2023.
Fitch will review the financial impact on the company from the acquisition of Glow and the investment in the ERU, as well as assess the improvement in GPSC's business profile in terms of size and scale stemming from these transactions to see how it affects their RWN placement.
Fitch will also reassess linkages between GPSC and PTT, including any extraordinary support and operational and strategic linkages with PTT Group.