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RAM Ratings affirms Perbadanan Bekalan Air Pulau Pinang’s AAA/Stable programme rating
Published on 21 Aug 2026.
RAM Ratings has affirmed the AAA/Stable rating of Perbadanan Bekalan Air Pulau Pinang Sdn Bhd’s (PBAPP or the Company) RM5 bil Islamic Medium-Term Notes (IMTN) Programme, reflecting the Company’s strategic role as Penang’s sole water operator, its close credit linkages to the state government and our expectations that extraordinary support is ‘almost certain’, if required.
Accordingly, the programme rating mirrors Penang’s state implicit strength, assessed to be ‘superior’ by the state’s advanced economic structure and healthy balance sheet. PBAPP’s exclusive mandate as Penang’s water supplier, state representation on its board and reliance on government support for key water projects reinforce the Company’s strong operational and financial linkage with the state.
PBAPP remains among Malaysia’s best-run water operators, with non-revenue water and reserve margin levels that outperform national averages. The Company’s operating record has remained resilient with stable water supply despite earlier concerns over chemical supply shortages due to the Middle East conflict and reduced raw water abstraction from Sungai Muda. River levels have since recovered following heavy rainfall, easing near term supply pressure, although raw water concentration remains a key operating risk.
PBAPP’s FY Dec 2025 earnings benefited from the full-year effect of the 2024 tariff hike and prudent cost management. While higher borrowings to fund capital expenditure (capex) moderated debt coverage and leverage metrics, liquidity remains sound, backed by RM203.9 mil in operating cash flow. Planned capex of RM2.40 bil over the next three years to strengthen water infrastructure and long-term supply resilience will be funded by IMTN drawdowns and internally generated funds. Credit metrics are expected to weaken but stay manageable, with funds from operations debt coverage projected to average 0.27 times and gearing peaking at 1.01 times. The latest rate revision, effective 1 July 2026, lends additional support for the Company’s capex plans.
Penang’s limited land area and water catchment capacity expose PBAPP to supply concentration risk, particularly as climate-related volatility increases. However, ongoing Water Contingency Plan 2030 projects and the recently signed 40-year treated water supply agreement with Perak, commencing in 2032, should improve long-term water security and supply diversification. We expect PBAPP to stay profitable, supported by tariff adjustments that sustain service delivery, although future rate increases may face greater political and public scrutiny.
Analytical contacts
Liew Kar Ling
(603) 2708 8216
karling@ram.com.my
Davinder Kaur Gill
(603) 2708 8220
davinder@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.
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Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.
Published by RAM Rating Services Berhad
© Copyright 2026 by RAM Rating Services Berhad
