RAM Ratings reaffirms AA1 ratings of Panglima Power’s Serial Bonds

Published on 10 January 2013

RAM Ratings has reaffirmed the AA1 rating of Panglima Power Sdn Bhd’s (“Panglima” or “the Company”) RM830 million Redeemable Secured Serial Bonds (“Serial Bonds”), with a stable outlook. Panglima is an independent power producer (“IPP”) that owns and operates a 720-MW nominal-capacity, combined-cycle gas-turbine power plant (“the Plant”) in Teluk Gong, Melaka.

The rating remains supported by Panglima’s sturdy business profile. In FYE 31 January 2012 (“FY Jan 2012”), the Company delivered a satisfactory operational performance, having met most of the operating parameters under its power purchase agreement (“PPA”) with Tenaga Nasional Berhad (“TNB”). The Company’s unscheduled outage rate has been kept within the permissible outage limit of 4%, thus enabling Panglima to claim full CPs in accordance with the terms of its PPA. In addition, there had been no failure to despatch instructions during the same period. Meanwhile, the Plant’s heat rates have been kept below the PPA’s allowable levels, thus allowing Panglima to fully pass through its fuel costs to TNB.

The Company’s debt-servicing ability remained intact in FY Jan 2012, with a debt-service coverage ratio (“DSCR”) of 1.78 times (with cash balances, post-distribution). Looking ahead, Panglima is expected to register minimum and average DSCRs (with cash balances, post-distribution) of 1.61 times and 2.03 times respectively, calculated on principal repayment dates. Meantime, we expect Panglima to be circumspect in terms of their dividend distributions to its shareholder in the current fiscal year given a lumpy principal repayment of RM240 million in order to maintain a minimum DSCR of 1.60 times (with cash balances, post-distribution), as covenanted under the Serial Bonds’ trust deed. Should payouts to the Company’s shareholder exceed our assumptions without any compensating factor in our sensitised pre-financing cashflow, the rating may come under pressure; we will reassess accordingly should such a situation materialise. However, RAM Ratings understands that the Company will retain sufficient cash to prioritise its debt-servicing obligations and potential maintenance expenditure throughout the tenure of the Serial Bonds.

Similar to other IPPs, the rating of the Serial Bonds is moderated by regulatory and single-project risks.

Media contact

Adeline Poh

(603) 7628 1021

adeline@ram.com.my