Published on 27 May 2020.
RAM Ratings has reaffirmed the AA2/Stable rating of Tanjung Bin Power Sdn Bhd’s (TBP or the Company) RM4.5 bil Sukuk Ijarah Programme (the Sukuk). The rating is underpinned by TBP's healthy operating performance that leads to satisfactory debt-coverage levels. The rating also reflects the Company’s strong business profile, backed by the favourable terms of its Power Purchase Agreement (PPA) with Tenaga Nasional Berhad (TNB), its sole off-taker. As with other independent power producers (IPPs), however, TBP is predisposed to regulatory and single-project risks.
TBP’s power plant (the Plant) has been registering healthy operational performance in the last five years, following various improvements since 2014. Correspondingly, the Plant has been operating within the PPA’s unscheduled outage limit, thus entitling TBP to full Available Capacity Payments (ACPs). Given the Plant’s lower rolling 365-day unscheduled outage rate of 2.3% as at end-2019 (end-2018: 5.1%), TBP was able to earn full ACPs in fiscal 2019 as it had operated well within the unscheduled outage limit.
Over the years, the Company has been able to fully pass on its fuel costs to TNB (its sole off-taker). However, there were some timing differences between the fuel cost and the collection of Energy Payments from TNB in 2019. That said, the amount was insignificant and we believe that TBP will continue to pass through its fuel cost in the future, as long as it operates within the stipulated PPA heat-rate requirements.
With the commencement of principal repayments on 16 August 2019, the Company’s finance service coverage ratio (FSCR, with cash balances) came in at 3.75 times on the same date. This is lower than the 12.23 times on the repayment date of 16 August 2018. However, it still exceeds our initial forecast of 2.80 times, thanks to operational outperformance.
Our sensitivity analysis continues to make allowances for revenue losses arising from plant outages. TBP’s debt-servicing capability is anticipated to remain intact, with projected minimum and average annual FSCRs (with cash balances) of a respective 1.65 and 3.38 times throughout the tenure of the Sukuk based on RAM’s sensitised case. In regards to its distributions to shareholders, TBP has asserted that it will adhere to the distribution covenants on a forward-looking basis throughout the tenure of the Sukuk, instead of just the year of assessment.
TBP is an IPP that owns and operates a 2,100 MW coal-fired power plant in Tanjung Bin, Johor, under a 25-year PPA with TNB that expires in September 2031.
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Ratings on Tanjung Bin Power Sdn Bhd