RAM Ratings reaffirms TTPC’s sukuk rating

Published on 29 June 2012

RAM Ratings has reaffirmed the AA1 long-term 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”) operating a 650-MW natural gas-fired, combined-cycle power plant (“the Plant”) in Kuala Sungai Baru, Perlis.

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

Since its commissioning, TTPC has kept its commendable operating performance, hence enabling it to meet all the performance requirements set out in the PPA to earn full available capacity payments. The Company has also been able to operate within the forced-outage limit of 6% since its commissioning, and has met the requirements of its combined first and second Availability Target (“AT”) blocks (i.e. 2004–2009). Going forward, RAM Ratings opines that TTPC is on course towards meeting the requirements of its third AT block (2010–2012). Given the Plant’s efficient performance, TTPC has also been able to fully pass through its fuel costs to TNB.

Based on RAM Ratings’ sensitised cashflow, TTPC’s annual finance service cover ratio (with cash balances, post-distribution) on principal repayment dates is expected to come up to at least 1.4 times. We note that the Company had not paid the maximum allowable dividends to its shareholders during the period under review, despite being permitted to do so by the covenants under the Trust Deed. However, our cashflow analysis assumes that TTPC will pay optimum dividends to its shareholders – pursuant to a shareholders’ agreement dated 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).

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Jocelyn Chiang

(603) 7628 1124

jocelyn@ram.com.my