Aboitiz Power Corporation has earned a PRS Aaa rating with a stable outlook from the Philippine Ratings Services Corporation (PhilRatings) for its proposed P10-billion bonds, with an oversubscription option of up to P2 billion.
PhilRatings, one of the country’s pioneering local credit rating agencies, cited AboitizPower’s significant levels of cash flows and financial flexibility in relation to debt service requirements; adequate capital structure, supported by the healthy increase in retained earnings; diversified portfolio, with good growth prospects; and its experienced management team as bases for the corresponding rating and outlook.
“Obligations rated PRS Aaa are of the highest quality with minimal credit risk. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong,” PhilRatings said in a statement.
AboitizPower’s bonds will have a tenor of 7 years and will be the company’s third issuance in relation to its three-year shelf registration of up to P30 billion. The proceeds will be used for the repayment of the company’s short-term loan obligations and for general corporate purposes.
Meanwhile, PhilRatings also maintained the issue credit rating of PRS Aaa and a stable outlook for the company’s outstanding P23.2 billion bonds.
With a stable outlook, the rating is likely to be maintained or to remain unchanged in the next 12 months.
According to PhilRatings, the company’s operations consistently produce strong cash flow levels, particularly in relation to debt service requirements.
“The continuously growing and inelastic demand for power likewise serves to temper the volatility in the company’s cash flows,” the agency explained.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) interest cover and debt service coverage ratios as of end-2018 were at 3.7x and 1.2x, respectively. The current ratio was at 1.89x. Cash levels as of end-2018 remained hight at P46.3 billion.
As of end-2018, the company maintained adequate capitalization levels, with its debt to equity ratio and capitalization ratio at 1.59x and 64.9%, respectively. On the other hand, the solvency ratio remained stable at 1.5x.
AboitizPower is reportedly set to add 133 MW and 935 MW of attributable net sellable capacity in the remainder of 2019 and in 2020, respectively, through its ongoing projects. Such will bring AboitizPower closer to its 2020 target of having 4,000 MW of attributable net sellable capacity.
In the first half of 2019, the company’s total operating revenues declined by two percent year-on-year, driven by lower earnings from Therma Mobile, Inc. (TMO) and GNPower Mariveles Coal Plant Ltd. Co. (GMCP). Such was partly offset by higher contributions from the distribution group.
On the other hand, operating expenses grew by four percent, given the higher cost of purchasing power and the higher cost of generation and other operating expenses related to the start of operations of Therma Visayas, Inc. and given full first half operations of Hedcor Bukidnon and Pagbilao Energy Corporation (PEC). It is also worth noting that spot market prices were higher during the first half of 2019.
Reduced income contributions from SN Aboitiz Power-Magat, Inc. and GNPower Dinginin Ltd. Co. (GNPD) were also recorded. This translated to a decrease in the share in net earnings of associates by 46%, from P1.92 billion to P1.04 billion.
The company likewise recorded other income of P2.06 billion, a change from other expenses of P1.15 billion in the same period last year. This was mainly from unrealized foreign exchange movements. Taking these results into account, net income decreased from P10.85 billion to P10.13 billion, with net profit margins declining from 16.7% to 15.8% in the same period last year.