SPR Energy enters remedy period to meet FSRA shortfall

Published on 26 Jan 2024.

RAM Ratings has received confirmation that SPR Energy (M) Sdn Bhd’s (SPR or the Company) Finance Service Reserve Account (FSRA) balances did not meet the minimum level covenanted under the transaction documents for its RM580 mil Senior Sukuk Ijarah (the Sukuk). The rating of the Sukuk remains at B1/Negative, reflecting the Company’s very weak capacity to meet sukuk obligations and limited ability to withstand any adverse operational challenges.

In accordance with the Sukuk’s terms, the Company is obliged to maintain FSRA balances equivalent to principal and profit payments due in the next six months. On 18 January 2024, SPR’s cumulative cash reserves totalled RM35.50 mil while its FSRA balance stood at RM11.66 mil against the RM49.75 mil needed to meet sukuk obligations due on 17 July 2024. The Company has confirmed that it will transfer RM20.78 mil of funds from the transaction’s revenue account into the FSRA, reducing the FSRA shortfall to RM17.31 mil.

As provided by the transaction terms, SPR has 30 days to remedy the shortfall. Management aims to make up the required balance with capacity payments to be received in February 2024 from Sabah Electricity Sdn Bhd as well as insurance claims proceeds for the unexpected flashover incident at SPR’s 100 MW combined-cycle gas turbine power plant (the Plant) last year. Upon the receipt of these payments, SPR will have enough to fill up the FSRA and therefore meet immediate sukuk obligations due in July 2024. However as timing of receipt of such payments remains uncertain, we understand that SPR will seek bondholders’ approval for a two-month extension to 16 April 2024 to remedy the FSRA shortfall.

Still, we highlight that another FSRA shortage may recur in January 2025 due to the transaction’s low cash reserves caused by the Plant’s past performance issues. RAM will continue following the progress of these discussions to seek resolution to the breach, and take the necessary rating action in our assessment of the outcome.

Analytical contacts
Seri Nuralya Munawir
(603) 3385 2484
nuralya@ram.com.my

Chong Van Nee, CFA
(603) 3385 2482
vannee@ram.com.my

Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my

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SPR Energy enters remedy period to meet FSRA shortfall