Published on 29 Nov 2019.
RAM Ratings has reaffirmed the AA3/Stable rating of Jimah Energy Ventures Sdn Bhd’s (JEV or the Company) RM4.85 bil Senior IMTN Facility (2005/2025). The reaffirmation is premised on our expectation that JEV will continue to perform satisfactorily and maintain its strong cashflow-generating aptitude vis-à-vis supporting its debt-servicing obligations. JEV is an independent power producer (IPP) that owns and operates a 1,400 MW coal-fired power plant in Port Dickson, Negeri Sembilan (the Plant), under a 25-year Power Purchase Agreement (PPA) with Tenaga Nasional Berhad (TNB).
The operations of JEV’s power plant exhibited further improvement during the reviewed period. Since the commencement of a new contract-year block in January 2018, the Plant has been operating within the unscheduled outage limit (UOL) of its PPA. While the Plant performed within the UOL1 of 6% under the PPA requirements throughout the reviewed period, it breached its UOL2 of 3.5% for several months. That said, it managed to recover and performed within the PPA requirements in June 2019. Its overall unscheduled outages reduced significantly to 848 hours in 2018 and 408 hours in 1H 2019, from 1,290 hours in 2017. This allowed the Company to earn full Available Capacity Payments (ACPs) and Daily Utilisation Payments (DUPs).
Since 2018, the Plant has undergone several overhauls to address some issues. It expected to undergo another two major overhauls, in December 2019 and May 2021. As such, the availability target (AT) for the Plant’s current contract-year block is envisaged to drop to 90%, compared to the PPA requirement of 91%. Although the Plant is likely to incur a penalty for failing to meet the targeted AT, the impact is envisaged to be minimal on its financial performance (less than 1% of the Plant’s annual revenue).
JEV registered a strong finance service coverage ratio (FSCR) of 2.40 times (with cash balances, post-distribution, calculated on payment date) on the last principal repayment date of the Senior IMTN on 12 November 2019. Even with some assumed outages under RAM’s sensitised cashflow assessment, coupled with the proposed dividend distribution of RM15.0 mil in FY 2019, the Company’s debt-servicing ability remains intact, with respective minimum and average annual FSCRs of 1.50 and 1.87 times (with cash balances, post-distribution, calculated on payment dates) throughout the remaining tenure of the Senior IMTN. The management has intimated that it will adhere to the distribution covenants on a forward-looking basis throughout the Senior IMTN’s tenure, as opposed to only in the year of assessment.
Notably, JEV derives some financial flexibility in the form of its payments to the holder of its RM895 mil Junior Debt – Special Power Vehicle Berhad – which are subordinated to the payments on the Senior IMTN. As permitted under the transaction structure, the Company may reduce its Junior Debt payments if required. As with other IPPs, JEV remains exposed to regulatory and single-project risks.
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Ratings on Jimah Energy Ventures Sdn Bhd