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RAM Ratings affirms AAA/P1 ratings of Air Selangor’s RM20 bil sukuk programme
Published on 28 Aug 2025.
RAM Ratings has affirmed the respective AAA/Stable and P1 ratings of Pengurusan Air Selangor Sdn Bhd’s (Air Selangor or the Company) Islamic Medium-Term Notes Programme (2020/-) and Islamic Commercial Papers Programme (2020/2027) (collectively, the Sukuk, with a combined limit of RM20 bil). The programme limit was raised from RM10 bil previously to support Air Selangor’s anticipated capital commitments.
The Company’s sukuk ratings are considered equivalent to the creditworthiness of its ultimate parent, the Selangor state government. This reflects our expectations that extraordinary financial support from the State government is ‘almost certain’, given the Company’s critical role in supplying treated water throughout Klang Valley. Past and ongoing support includes loans, grants and transfers of water infrastructure.
Selangor’s State Implicit Strength (SIS) is assessed to be ‘superior’, the highest category under RAM’s SIS Framework. With consistent fiscal surpluses since 2020, a strong net cash position and very low public debt, the state government is financially sound and has the capacity to provide timely support to Air Selangor in the event of a temporary liquidity need.
Independently of that, Air Selangor maintains a healthy liquidity profile with cash reserves of RM1.8 bil as at end-March 2025, comfortably covering short-term debts of RM775 mil. Its revenue rose to RM2.9 bil in 2024 (2023: RM2.5 bil) in tandem with higher tariffs in February the same year. A recently announced rate hike, effective 1 September 2025, will help narrow the gap between the Company’s income and sizeable depreciation, leasing and financing costs. Although Air Selangor is expected to remain loss-making in the medium term due to still low water tariffs, the rate increase demonstrates the regulator’s commitment and industry’s concerted efforts toward achieving long-term sustainability of water operations.
From 2025 to 2029, the Company expects to incur annual capital expenditure (capex) of about RM1.9 bil on average, primarily for the construction of the Rasau water treatment plant, pipe replacements and other non-revenue water reducing initiatives. To sustain operations and meet financing and capex needs, the Company relies on continuous sukuk drawdowns, resulting in hefty leverage and weak debt coverage metrics. With an anticipated sukuk drawdown of RM10.6 bil over the next five years, the management is projecting its gearing to peak at 9.6 times in 2027 and funds from operations debt coverage to average at a weak 0.06 times. As of July 2025, RM6.2 bil of sukuk was outstanding.
Air Selangor’s proportion of non-revenue water improved to 27.0% in 2024 (2023: 27.7%) – among the best in the country – outperforming the National Water Services Commission’s target. Other operational performance metrics also remain commendable, with pipe leaks and bursts trending down following stepped-up pipe replacements and enhanced monitoring. A planned increase in water treatment capacity and improvements to water grid interconnectivity are anticipated to boost the water reserve margin and keep supply disruptions low.
Analytical contacts
Lee Yee Von
(603) 2708 8217
yeevon@ram.com.my
Chong Van Nee, CFA
(603) 2708 8210
vannee@ram.com.my
Media contact
Sakinah Arifin
(603) 2708 8212
sakinah@ram.com.my
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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