Investing.com -- Moody’s Ratings has downgraded the Baseline Credit Assessment (BCA) and long-term issuer rating of Ratch Group Public Company Limited (Ratch) to ba1 and Baa2 respectively from baa3 and Baa1. The ratings agency also revised the outlook for Ratch from negative to stable today.

In addition, Moody’s has downgraded the ratings of borrowings and programs guaranteed by Ratch. For RH (NYSE: RH ) International (Singapore) Corp. Pte. Ltd., the Backed Senior Unsecured MTN Programme (Foreign Currency) and the Backed Senior Unsecured rating (Foreign Currency) have been downgraded to (P)Baa2 and Baa2 from (P)Baa1 and Baa1 respectively. The outlook for RH International (Singapore) Corp. Pte. Ltd. has also been revised to stable from negative.

The rating actions are a reflection of the ongoing execution of Ratch’s growth strategy, which is expected to keep consolidated financial metrics below the earlier downgrade trigger for the next few years. Uncertainties related to power demand in Thailand amid new US tariffs and global uncertainty have also been factored into the rating action.

Ratch’s capital expenditure for renewable energy projects, undertaken by its joint ventures (JVs) and associates, is expected to remain substantial over the next 2-3 years. The company has approximately 1.4GW of greenfield capacity in the pipeline, with projects spanning various countries including Australia, the Philippines, and Laos. These projects will require an annual average equity injection of THB 6-8 billion from 2025 to 2026, along with additional project debt drawdowns.

Ratch has diversified its operating locations over the years, establishing a presence in Thailand, Australia, Indonesia, and Laos. The company’s financial metrics are expected to remain below the earlier downgrade trigger due to these capital expenditure commitments.

Ratch’s Baseline Credit Assessment continues to factor in the company’s long-term Power Purchase Agreements (PPAs), secured fuel supply, and stable operations in Thailand. The issuer rating includes a two-notch uplift based on the high level of support from the Government of Thailand, reflecting the 45% effective government ownership in Ratch and its strategic importance as one of Thailand’s largest Independent Power Producers.

The rating action also considers the recent revision of Thailand’s outlook from stable to negative, due to increasing uncertainties about the country’s economic and fiscal strength amid sweeping US tariffs, which may translate into reduced power demand growth in Thailand.

Environmental, Social and Governance (ESG) considerations have a limited impact on the ratings of Ratch, with potential for greater negative impact over time, due to the company’s increasingly intricate organizational structure and growth via joint ventures and associates.

The stable outlook reflects Moody’s expectation that Ratch’s financial metrics will be sustained at current levels over the next 2-3 years. A BCA upgrade could occur if Ratch’s financial profile strengthens such that the FFO/debt ratio rises to above 12% on a sustained basis, based on the pro-rata consolidation of its JVs and associates. Conversely, a more aggressive expansion plan introducing additional business or regulatory risks or requiring more debt-backed funding could lead to a BCA or rating downgrade.

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