RAM Ratings places SPR’s Senior Sukuk on negative rating watch

Published on 09 Jun 2023.

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RAM Ratings has placed the BBB2/Negative rating of SPR Energy (M) Sdn Bhd’s (SPR or the Company) RM580 mil Senior Sukuk Ijarah (the Sukuk) on Rating Watch with a negative outlook. 

The rating action is prompted by a recent unexpected flashover incident at the second gas turbine (GT2) generator of SPR’s 100 MW combined-cycle gas turbine power plant in Kimanis Sabah (the Plant). The Plant’s scheduled major inspection was completed in December 2022, including replacement works for its second heat recovery steam generator. We understand that GT2 has been offline since 1 April 2023 and the timing of full recovery remains uncertain. As a result, SPR has operated at half load. Financial implications from the loss of available capacity payments and associated repair costs, if prolonged, will exert considerable pressure on the Company’s debt servicing ability, which has already been weakened by the cumulative effects of cashflow underperformance over the years.

Further inspections and investigations are underway to determine the root cause of the incident as well as appropriate remedial action. We have been informed that Sabah Electricity Sdn Bhd and the Energy Commission have extended support to resolve the matter, given the Plant’s importance to Sabah’s already tight power supply.   

The Rating Watch is expected to be resolved within four to five months as more information is made available to us on the quantum of capital expenditure required for repairs, the extent of the revenue loss and possible insurance claims. 

RAM’s Rating Watch highlights a possible change in an issuer’s debt rating. It focuses on identifiable events such as mergers, acquisitions, regulatory changes and operational developments that place a rated debt under RAM’s special surveillance. In a broader sense, the Rating Watch covers any event that may result in changes in risk factors relating to the repayment of principal and interest.

Issues are put on Rating Watch when some of the abovesaid events are expected to or have occurred. The Rating Watch, however, does not mean that the rating will inevitably be changed. It only means that RAM is evaluating the rating and a final affirmation is pending. A “positive” outlook indicates that a rating may be raised while a "negative" outlook indicates a possible downgrade. A “developing” outlook refers to unusual situations in which future events are so unclear that the rating may potentially be raised or lowered.


Analytical contacts
Seri Nuralya Munawir
(603) 3385 2484

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
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