Published on 26 Nov 2020.
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 the Company will continue to perform satisfactorily while generating strong cashflow. 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 improved during the reviewed period. As at end-December 2019 and end-August 2020, the Plant’s rolling 365 unscheduled outage rate1 (UOR) had eased to a respective 3.51% and 1.40% - well within the PPA’s required unscheduled outage limit (UOL) of 6%. This allowed the Company to earn full Available Capacity Payments (ACPs) and Daily Utilisation Payments (DUPs). The Plant’s Unit 1 underwent a major overhaul between January and March 2020 while Unit 2 is envisaged to need one in 2022. As such, the availability target (AT) for its third contract-year block (2018-2021) is expected to dip to 90.55%, compared to required average AT of 91% under the PPA. The Plant will incur an additional penalty if it fails to achieve the required target of 91%, although the impact is marginal (about 0.2% of its annual revenue).
JEV posted a strong finance service coverage ratio (FSCR) of 2.38 times (with cash balances, post-distribution, calculated on payment date) on 12 November 2020 - the last principal repayment date of the Senior IMTN. RAM’s sensitised cashflow assumes some outages and a RM50.0 mil dividend distribution in FY Dec 2020. Despite this, the Company’s debt-servicing ability remains intact, with respective minimum and average annual FSCRs of 1.50 and 1.94 times (with cash balances, post-distribution, calculated on payment dates) throughout the remaining tenure of the Senior IMTN. The management has highlighted 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. These are subordinated to the payments on the Senior IMTN. As permitted under the transaction, 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