RAM Ratings reaffirms AA3 rating of Jimah Energy Ventures' Senior IMTN

Published on 26 August 2011
RAM Ratings has reaffirmed the AA3 rating of Jimah Energy Ventures Sdn Bhd’s (JEV or the IPP) RM4.85 billion Senior Islamic Medium-Term Notes Facility (2005/2024) (Senior IMTN); the long-term rating has a stable outlook. JEV is an independent power producer (IPP) that owns and operates a 1,400-MW coal-fired power plant (the Project or the Plant) in Port Dickson, Negeri Sembilan, under a 25-year Power Purchase Agreement (PPA) with Tenaga Nasional Berhad (TNB).



The reaffirmation is premised on JEV’s sturdy business profile, supported by the favourable terms of its PPA with TNB and commendable operating performance to date. Since the commissioning of Units 1 and 2, JEV has been able to claim almost full available capacity payments (ACPs) (consisting of a fixed operating rate and a non-despatch-dependent capacity rate financial or CRF), having kept its operating parameters within the requirements of its PPA. Although the IPP has exceeded its PPA heat-rate limit in certain months last year due to low despatch and frequent start up and shutdown requested by TNB, fuel margin from other months managed to make up for the losses, thus allowing fuel costs to be fully passed through to TNB in fiscal 2010. These, coupled with a well-structured debt-repayment profile, underpin JEV’s healthy debt-servicing ability. Similar to all other IPPs, however, JEV remains exposed to regulatory and single-project risks.

As a third-generation IPP, JEV bears some demand risk. Currently, 85% of its CRF will be guaranteed – subject to meeting certain performance requirements - while the remaining 15% (also known as the daily utilisation payment or DUP) will be paid according to despatch. With effect from the 13th anniversary of the COD of the first unit, the CRF will be reduced to 80% while the DUP will be increased to 20%. Meanwhile, JEV also earns energy payments (EPs) that allow it to fully pass through its coal costs – provided the Plant operates within the allowable heat rates under the PPA. All said, JEV is expected to maintain its healthy debt-servicing ability, as reflected by its projected finance service coverage ratio (FSCR) of at least 1.40 times (with all cash balances, post-distribution) on payment date.

In assessing JEV’s ongoing annual distributions to Special Power Vehicle Berhad (SPV) (via SPV’s subscription of the former’s Junior Debt), RAM Ratings’ projections assume that the IPP will adhere to its financial covenants throughout the Senior IMTN’s tenure (i.e. on a forward-looking basis, as opposed to only the year of assessment).

Media contact
Yean Ni Ven
(603) 7628 1172
niven@ram.com.my