RAM Ratings has reaffirmed the AA3/Stable/- rating of Jimah Energy Ventures Sdn Bhd’s (JEV or the IPP) RM4.85 billion Senior Islamic MTN Facility (2005/2025).

Published on 07 October 2013

RAM Ratings has reaffirmed the AA3/Stable/- rating of Jimah Energy Ventures Sdn Bhd’s (JEV or the IPP) RM4.85 billion Senior Islamic MTN Facility (2005/2025). JEV is an independent power producer (IPP) that owns and operates a 1,400-MW coal-fired power plant (the Plant) in Port Dickson, Negeri Sembilan, under a 25-year Power Purchase Agreement (PPA) with Tenaga Nasional Berhad (TNB).
The reaffirmed rating is premised on JEV’s strong business profile, underscored by the favourable terms of its PPA with TNB. We derive further comfort from the sturdy credit profile of its sole off-taker, TNB, whose debt facility is rated AAA/Stable/- by RAM. As expected, JEV registered a strong finance service coverage ratio (FSCR) of 2.33 times (with cash balances, post-distribution) on its last principal repayment date (i.e. 10 May 2013), underscored by a cash hoard of RM538.57 million. Going forward, the IPP’s average annual pre-financing cashflow of RM710.98 million is expected to sufficiently support its Senior IMTN obligations, as reflected by its projected minimum FSCR (with cash balances, post-distribution, calculated over a 12-month period on semi-annual principal repayment dates) of 1.54 times throughout the tenure of this instrument.
Given the loss-absorption features of its RM895 million Junior Debt, which is subordinated to the Senior IMTN, reductions in the IPP’s pre-financing cashflow will be cushioned by corresponding decreases in its payments to the Junior Debt holder, i.e. Special Power Vehicle Berhad (SPV). In assessing JEV’s ongoing distributions to SPV, our sensitised projections assume that the amounts are as represented by JEV and that the IPP will adhere to its financial covenants on a forward-looking basis throughout the Senior IMTN’s tenure, as opposed to only the year of assessment.
Meanwhile, JEV had experienced a number of unscheduled outages, largely attributable to accelerated wear and tear owing to the Plant’s high load factor since late 2010. As a result, available capacity payments and daily utilisation payments from TNB were slightly reduced from May to August 2012. However, the reduction was compensated by the operations and maintenance service provider, a consortium made up of Jimah O&M Sdn Bhd and Jimah Teknik Sdn Bhd. Hence, the total ACPs and DUPs remain intact.
As with other IPPs, JEV remains exposed to regulatory and single-project risks.

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Adeline Poh
(603) 7628 1021
adeline@ram.com.my