RAM Ratings reaffirms AA1(s)/Stable rating of Sarawak Power Generation’s sukuk

Published on 30 Nov 2021.

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RAM Ratings has reaffirmed the AA1(s)/Stable rating of Sarawak Power Generation Sdn Bhd’s (SPG or the Company) RM215 mil Serial Sukuk Musharakah (2006/2021).

The enhanced rating reflects support for SPG from Sarawak Energy Berhad (SEB or the Group), which owns the Company via 100%-held SEB Power Sdn Bhd. SPG holds the licence to build, own and operate a 317 MW combined-cycle, gas turbine power plant (the Plant) in Tanjung Kidurong, Bintulu, Sarawak.

SEB has provided various forms of assistance to SPG through the last decade. Backing this is a letter of support from Syarikat SESCO Berhad – a wholly owned subsidiary of SEB and SPG’s sole off-taker – in which SESCO undertakes to ensure that SPG fully and promptly meets all its financial obligations in respect of the Sukuk throughout the tenure of the facility.

Under the terms of its power purchase agreement with SESCO, SPG earns full capacity payments as long as Units 7 and 8 of the Plant maintain a dependable capacity of 105 MW and a minimum rolling monthly Equivalent Availability Factor of 85%, regardless of the amount of electricity sold. As a provider of essential services, SPG continued to operate throughout lockdown periods amid the pandemic. However, shorter operating hours and delays from movement curbs extended major inspections of the Plant, which resulted in higher capacity losses and lower energy payments. This led to significantly weaker earnings.

As at end-June 2021, SPG’s cash balances of RM27.34 mil – including reserves in the fully funded Sukuk Distribution Account – more than sufficiently cover its final obligations of RM10.41 mil due in December 2021.

Analytical contacts
Lee Yee Von                
(603) 3385 2503                    

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.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
© Copyright 2021 by RAM Rating Services Berhad


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