RAM Ratings reaffirms TTPC’s debt rating

Published on 27 June 2011

RAM Ratings has reaffirmed the AA1 rating of Teknologi Tenaga Perlis Consortium Sdn Bhd’s (TTPC or the Company) RM1,515 million Al-Istisna’ Fixed-Rate Serial Bonds (2001/2016) (the Bonds), with a stable outlook. TTPC is an independent power producer (IPP) that owns and operates a 650-MW natural gas-fired, combined-cycle power plant (the Plant) in Kuala Sungai Baru, Perlis.

The rating remains supported by TTPC’s sound business profile, underscored by the favourable terms of its Power Purchase Agreement (PPA) with Tenaga Nasional Berhad (TNB). Under the terms of the PPA, TTPC is entitled to earn full available capacity payments (ACPs) irrespective of the quantum of electricity generated - subject to meeting certain performance requirements. In addition, the IPP is allowed to fully pass through its fuel costs to TNB based on the formula for energy payments (EPs) in the PPA, so long as the Plant operates within the allowable heat-rate requirements. TTPC’s rating is also driven by its commendable operating performance to date. Since commissioning, the Plant has been meeting all the performance requirements under the PPA to earn full ACPs, and has been able to fully pass through its fuel costs each year.

Despite having repaid RM115 million of the Bonds’ principal and distributing RM80 million of dividends to its shareholders, TTPC’s finance service cover ratio (FSCR) remained intact at 2.15 times (with cash balances, post-distribution) in FYE 30 September 2010 (FY Sep 2010). Looking ahead, TTPC is projected to maintain its strong debt-servicing ability, with an average annual pre-financing cashflow of approximately RM220 million. This translates into a projected FSCR of at least 1.41 times (with cash balances, post-distribution) on its principal repayment dates throughout the remaining tenure of the Bonds. RAM Ratings’ cashflow analysis assumes that TTPC would pay optimum dividends to its shareholders - pursuant to a shareholders’ agreement on 23 May 2008 - while adhering to its financial covenants throughout the Bonds’ tenure (i.e. on a forward-looking basis, as opposed to only the year of assessment). Such covenants include a post-distribution FSCR of at least 1.4 times, the requirement to maintain a balance in the finance service reserve account that is equivalent to its total obligations due on the next maturity date, and ensuring that its debt-to-equity ratio does not exceed 80:20.

In the meantime, the rating remains moderated by TTPC’s exposure to regulatory and single-project risks, similar to all other IPPs.

Media contact
Evelyn Khoo
(603) 7628 1075
evelyn@ram.com.my