RAM Ratings affirms B1/Negative rating of SPR Energy’s Senior Sukuk

Published on 03 Jul 2024.

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RAM Ratings has affirmed the B1/Negative rating of SPR Energy (M) Sdn Bhd’s (SPR or the Company) Senior Sukuk Ijarah of RM580 mil (the Sukuk). 

The rating continues to reflect SPR’s very weak capacity to fully meet its sukuk obligations and limited ability to withstand any adverse operational challenges of its 100MW combined-cycle, gas turbine power plant in Kimanis Sabah (the Plant). Without an external liquidity injection, our simulations show that the transaction remains susceptible to recurring covenant breaches and a possible default in the near term. 

Given its thin cash buffers, the Company is likely to breach its required minimum finance service reserve account (FSRA) balance on 17 January 2025 and 17 January 2026 prior to the potential default in July 2026. Although SPR’s improved working capital cycle and more prudent cost management have delayed the potential default date by another year from the July 2025 date anticipated earlier, the Company’s debt servicing ability remains vulnerable. The failure to remedy the potential FSRA breach within 30 days will constitute an event of default for the Sukuk. As such, the rating outlook remains negative.  

In the immediate term, SPR’s closing cash balance of RM62.4 mil as at end-April 2024 is sufficient to meet RM58.5 mil of sukuk principal and profit obligations due within the next 12 months. The RM49.9 mil of funds in the FSRA as at 16 April 2024 adequately cover principal and profit payments of RM49.7 mil due on 17 July 2024. 

The Company registered its highest level of Available Capacity Payment (ACP) losses in FY Dec 2023, amounting to RM19.7 mil (20% of total revenue for the period), with a rolling unscheduled outage rate (UOR) of 21.8%. As previously highlighted, this was largely due to the five-month forced shutdown of the Plant’s second gas turbine generator from 31 March to 24 August 2023. Following major repairs to the generator, the Plant’s performance showed signs of improvement, with its rolling UOR easing to 17.3% by end-April 2024. SPR recorded only RM0.40 mil of ACP losses in 4M FY Dec 2024 (1% of revenue). However, its ability to sustain the Plant’s improved performance is clouded by its volatile history, which exposes the Company’s cash flow to unexpected downtime and unforeseen capital expenditure needs.

The year’s significant revenue losses led to a markedly lower top line of RM66.3 mil in fiscal 2023 (fiscal 2022: RM86.2 mil). Combined with higher operating costs amid plant repairs, the Company’s pre-tax loss widened to RM4.1 mil (fiscal 2022: pre-tax loss of RM0.70 mil). Nevertheless, the recently stabilised plant performance helped bring its bottom line back to the black at RM1.78 mil in 4M fiscal 2024. 

Despite the challenges, SPR’s business fundamentals remain underscored by the terms of its power purchase agreement (PPA), under which performance requirements are stricter compared to PPAs of other RAM-rated independent power producers. The Company is entitled to earn fixed ACPs, irrespective of the quantum of electricity generated, so long as it meets the unscheduled outage limits. SPR may also fully pass through fuel expenses to its sole offtaker, Sabah Electricity Sdn Bhd (SESB), if it operates within the PPA heat rate limits, which the Company has consistently adhered to. Receivables from SESB have generally been promptly settled within two months of receipt of invoice.


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.

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