RAM Ratings reaffirms Special Power Vehicle's debt rating

Published on 26 August 2011
RAM Ratings has reaffirmed the A1 rating of Special Power Vehicle Berhad’s (SPV or the Company) RM800 million Class A Islamic Medium-Term Notes Facility (2005/2022) (Class A IMTN); the long-term rating has a stable outlook.



SPV is a special-purpose vehicle set up as a funding vehicle to raise part of the financing required for the development of Jimah Energy Ventures Sdn Bhd’s (JEV or the IPP) coal-fired power plant (the Project or the Plant) - comprising 2 power-generating units, each with a capacity of 700 MW - in Port Dickson, Negri Sembilan. The reaffirmation of SPV’s debt rating is concurrent with that of JEV’s AA3-rated RM4.85 billion Senior Islamic Medium-Term Notes Facility (2005/2024) (Senior IMTN), which has a stable outlook.

SPV’s Class A IMTN is a subordinated project debt since this facility and JEV’s Senior IMTN depend on a single project as their only source of cashflow. RAM Ratings’ approach to rating a subordinated project debt focuses on the extent of its subordination to more senior project debts, and the effective cashflow protection provided to the subordinated debt, i.e. its sub-finance service cover ratio (or sub-FSCR). The sub-FSCR measures the residual cash after meeting the obligations as well as the cash-trap mechanisms and distribution tests of JEV’s Senior IMTN.

The 1-notch difference between the ratings of the Class A IMTN and JEV’s Senior IMTN is premised on the former’s subordination to the latter as well as its strong debt-like features. Furthermore, the rating of the Class A IMTN is supported by the projected minimum and average sub-FSCRs, on payment date, of 1.07 times and 1.26 times, respectively. In assessing SPV’s distributions, RAM Ratings’ cashflow projections assume that the Company will adhere to its financial covenants throughout the tenure of the Class A IMTN (i.e. on a forward-looking basis, as opposed to only the year of assessment). That said, we caution that any excessive distribution will diminish the coverage available for the Class A IMTN.

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