RAM Ratings reaffirms Mukah Power’s AA1(s) sukuk rating

Published on 30 Nov 2021.

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RAM Ratings has reaffirmed the enhanced AA1(s)/Stable rating of Mukah Power Generation Sdn Bhd’s (MPG or the Company) RM665 mil Senior Sukuk Mudharabah Programme (2006/2021). 

The rating reflects Sarawak Energy Berhad’s (SEB or the Group) strong support for MPG, which the Group owns via 100%-held subsidiary, SEB Power Sdn Bhd. MPG is a power producer incorporated to construct, own, operate and maintain a 270 MW coal-fired power plant (comprising two generating units) in Mukah, Sarawak (the Plant).

SEB had extended support to MPG on several occasions in the past. For instance, on 31 December 2017, MPG and Syarikat SESCO Berhad (SESCO, the state utility company of Sarawak and a wholly owned subsidiary of SEB) inked a new PPA (effective from 2018) with more favourable terms. SESCO also provided MPG with a letter of support (LoS) dated 21 August 2013 undertaking to ensure that the Company meets its financial obligations in respect of the Senior Sukuk for the tenure of the facility.

Unit 1’s prolonged outage since December 2019 caused the Plant to run on half its capacity. The Company’s financial performance took a steep decline into a net loss of RM9.39 mil in 1H FY Dec 2021 (FY Dec 2019: net profit of RM34.29 mil; FY Dec 2020: net profit of RM4.41 mil) due to a one-off provision and impairment totaling RM34 mil. Despite this, MPG’s pre-financing cashflow remained healthy, albeit contracting sharply to RM82 mil in FY Dec 2020 (FY Dec 2019: RM104 mil). In terms of cashflow coverage, MPG’s sukuk service coverage ratio (SSCR) of 2.22 times as at 28 June 2021 outperformed our projection of 1.48 times as the Company withheld dividend payments in favour of building its cash coffers.

As at end-June 2021, the Company had a total cash balance of RM93.64 mil – including RM36.5 mil in the Sukuk Payment Account, as required under the transaction terms – which is sufficient to cover its final sukuk obligation of RM36.5 mil in December 2021. 


Analytical contacts
Jack Kwan
(603) 3385 2532

Chong Van Nee, CFA
(603) 3385 2482

The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

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