Published on 20 Jan 2020.
RAM Ratings has reaffirmed the AAA/Stable rating of Manjung Island Energy Berhad’s (MIEB) RM3.86 bil Islamic Securities (2011/2030) (Series 1) and also the enhanced AAA(s)/Stable rating of its RM990 mil Islamic Securities (2011/2031) (Series 2). The rating reaffirmation for Series 1 is based on TNB Janamanjung Sdn Bhd’s (TNBJ or the Company) strong cashflow-generating capability and superior cash buffer to meet MIEB’s financial obligations.
TNBJ is the sole source of cashflow for MIEB, a trust-owned SPV established to raise funding for the construction of a 1,010-MW coal-fired power plant (GF2), which is located next to the 2,100-MW coal-fired Sultan Azlan Shah power plant in Perak (GF1) (collectively, the Facilities). Given this, we recognise the strong credit link between MIEB and TNBJ and view both companies in aggregate.
The reaffirmation of the enhanced rating of Series 2 is anchored by the credit strength of the irrevocable and unconditional corporate guarantee from Tenaga Nasional Berhad (TNB).
GF1 and GF2 delivered healthy operating performances in the first seven months of 2019, as opposed to the numerous operational challenges that had affected them in the past. GF1 was able to claim full Available Capacity Payments (ACPs) while GF2 incurred some ACP losses following a few forced outages. In the light of the operational disruption of GF1 since October 2019, our sensitised cashflow projections have conservatively incorporated some underperformance by both GF1 and GF2.
Factoring in these outages as well as sizeable distributions on its redeemable preference shares (held by TNB), RAM’s sensitised cashflow projections indicate that TNBJ will still be able to register respective minimum and average finance service coverage ratios of 2.0 and 4.6 times (with cash balances, post-distribution) throughout the tenure of Series 1. The Company’s robust debt coverage is buttressed by its substantial cash holdings accumulated over the past decade of GF1’s operations, a well-matched debt-repayment profile and the stringent covenants under Series 1.
Meanwhile, Series 2 has been structured with a RM990 mil bullet repayment on 25 November 2031, which TNBJ is anticipated to be able to meet given that it has ample room to manage its cashflow vis-à-vis fulfilling its financial obligations under this debt facility.
As with other independent power producers, TNBJ is also exposed to force majeure and regulatory risks.
Goh Kwan Kheen, Timothy
(603) 3385 2496
(603) 3385 2577
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Ratings on Manjung Island Energy Berhad