RAM Ratings reaffirms AA1 rating of GB3’s Islamic debt securities

Published on 18 June 2012

RAM Ratings has reaffirmed the AA1 rating of GB3 Sdn Bhd’s (“GB3” or “the Company”) RM850 million Senior Secured Al-Bai Bithaman Ajil Bond Facility (“ABBA Bonds”), with a stable outlook. GB3 is an independent power producer (“IPP”) operating a 640-MW combined-cycle, gas-turbine power plant in Lumut, Perak.

The rating is supported by GB3’s strong business profile, underscored by the favourable terms of its Power Purchase Agreement (“PPA”) with Tenaga Nasional Berhad, satisfactory operating record and healthy cashflow that supports its debt-servicing ability. Similar to all other IPPs, however, the rating is moderated by regulatory and single-project risks.

In fiscal 2011, GB3 delivered a satisfactory operational performance and was able to earn full available capacity payments, having met all the requirements set out in the PPA. That said, GB3’s third availability target block (2009 to 2011) averaged at 91.52%, i.e. marginally higher than the contracted 91.5% and weaker than the previous 2 blocks. Nevertheless, the Company experienced few unscheduled outages in 2011, thus keeping its unscheduled outage rate well within the allowable limit.

Based on a stressed scenario, GB3’s minimum and average finance service cover ratios (“FSCRs”) (with cash balances, post-distribution) on principal repayment dates are projected to come in at 1.25 times and 1.61 times, respectively. In assessing GB3’s annual distribution to its shareholders, RAM Ratings assumes that the Company will adhere to its financial covenants throughout the ABBA Bonds’ tenure (i.e. on a forward-looking basis as opposed to only the current year). All said, GB3's debt-servicing ability has remained strong to date, with its FSCR (with cash balances, post-distribution) as at financial year end hovering around 1.89 to 2.48 times over the past 5 years.

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Jocelyn Chiang

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jocelyn@ram.com.my