Published on 25 Feb 2020.
RAM Ratings maintains its stable outlook on the Malaysian power sector amid the impending liberalisation of the industry in Peninsular Malaysia. Tenaga Nasional Berhad (TNB) and Sarawak Energy Berhad – both rated AAA/Stable – continue to exhibit healthy operational and financial profiles. Sabah Electricity Sdn Bhd (not rated) also boasts a strong financial position, underscored by the Government’s solid support. The sector’s still-supportive regulatory landscape helps uphold the credit strength of the vertically integrated utility companies and independent power producers (IPPs) within their jurisdictions.
The main highlights of RAM’s latest publication, Malaysian Power Sector: Long road to liberalisation, include the following:
With a five-year average annual issuance of about RM8.4 bil for 2015-2019, the power industry is one of the most active sectors tapping the domestic bond market. Outstanding power bonds and sukuk summed up to some RM65 bil as at end-January 2020, equivalent to about 9% of Malaysia’s total outstanding corporate bonds. Mirroring the Government’s agenda, the power sukuk market was driven by RE projects in 2019. While the facility sizes are much smaller than those of conventional power projects, the RE segment has been driving Malaysia’s Sustainable and Responsible Investment (SRI) sukuk market.
RAM has rated numerous prominent firsts in the SRI sukuk market along with innovative financing structures that have involved the pooling of multiple plants that enable smaller IPPs to successfully tap the market. “As the award of RE projects become more competitive, we expect financing structures to evolve to help bridge the funding needs of RE producers. That said, the key considerations of sound project economics backed by strong counterparties and robust cashflow matching are still critical to our credit analysis,” explains Chong Van Nee, co-head of Infrastructure and Utilities Ratings.
RAM’s Industry Insight, entitled Malaysian Power Sector: Long road to liberalisation, is available for download at www.ram.com.my.
Chu Jia Ying
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Established in 1990, RAM Ratings is a leading credit rating agency registered under the Securities Commission’s Guidelines on Registration of Credit Rating Agencies, 2011. In addition to the provision of credit ratings for corporate bonds and sukuk and their issuers, RAM Ratings also provides research and publications on Islamic finance, fixed income and macro-economic and industry analysis as well as data analytics relating to credit risk, counterparty assessments and other related domains.
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