RAM Ratings reaffirms rating of Special Power Vehicle’s Class A IMTN, revises outlook to negative

Published on 30 November 2012

RAM Ratings has reaffirmed the A1 long-term 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”). Meanwhile, the outlook on the long-term rating has been revised from stable to negative.

SPV is a special-purpose vehicle set up as a funding conduit to raise part of the funds 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, Negeri Sembilan. To finance the Project, JEV has issued 2 debt programmes – the RM4.85 billion Senior Islamic Medium-Term Notes Facility (2005/2025) (“Senior IMTN”, rated AA3/Stable/-) and the unrated RM895 million Junior Debt (2005/2034) (“Junior Debt”); the latter is fully subscribed by SPV and subordinated to the Senior IMTN.

The negative outlook is premised on our concerns about the future servicing of the Class A IMTN as a result of SPV’s weaker cashflow. In FYE 31 December 2011, about RM300 million of cash flowed out of the Project; this comprised higher-than-expected profit payments on the Company’s subordinated debt, i.e. its RM215 million Class B Islamic Medium-Term Notes Facility (“Class B IMTN”), and heftier-than-anticipated capital spending by the IPP, which had reduced the residual cashflow available for SPV.

Going forward, as per the management’s representation, SPV is expected to continue making profit payments on the Class B IMTN, to the extent that the Company can just meet its last payment obligation on the Class A IMTN (9 years later). While SPV’s immediate-term liquidity profile remains intact, the slightest deviation of its cashflow below our expectations – either due to higher-than-projected profit payments on the Class B IMTN or lower-than-projected future cash inflows from JEV – would impair the Company’s debt-servicing ability on the Class A IMTN. Should any of these events occur, the rating will be subject to downward pressure.

Media contact

Anne Yap

(603) 7628 1038

anne@ram.com.my