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

Published on 01 November 2013

RAM Ratings has reaffirmed the rating of Panglima Power Sdn Bhd’s (Panglima or the Company) RM830 million Redeemable Secured Serial Bonds at AA1/Stable/-. The reaffirmation of the rating continues to reflect the independent power producer’s (IPP) strong business profile, underscored by the favourable terms of its Power Purchase Agreement (PPA) with Tenaga Nasional Berhad (TNB) and its healthy debt-servicing ability. As with other IPPs, Panglima’s rating is moderated by inherent regulatory and single-project risks.

During the period under review, Panglima experienced a generator rotor breakdown in September 2012. The incident had pushed its unscheduled outage rate (UOR) up to 6.93% in calendar year 2012, above the PPA limit of 4%. This had resulted in available capacity payment (ACP) losses amounting to approximately RM30.0 million in FY March 2013. The loss from this incident is claimable under insurance policies procured by the Company. In our assessment, the Company’s UOR is expected to be lower than 4% by early November 2013. Nevertheless, against Panglima’s healthy cash balance of RM271.7 million as at FY March 2013 and projected pre-financing cashflow of RM244.2 million in FY March 2014, the Company’s ACP losses are envisaged to have minimal impact on its debt-servicing ability.

As at its recent principal repayment on 19 September 2013, Panglima’s debt-service coverage ratio (DSCR) of 2.04 times (with cash balances, post-distribution) had exceeded our expectations, underscored by a healthy RM280.5 million of cash holdings. Based on a stressed scenario, the Company is expected to register minimum and average DSCRs (with cash balances, post-distribution) of 1.60 times and 1.66 times, respectively, calculated on principal repayment dates. In assessing Panglima’s ongoing annual distributions to its shareholders, our sensitised cashflow assumes that the Company will optimise distributions while adhering to its financial covenants throughout the tenure of the Serial Bonds (i.e. on a forward-looking basis as opposed to only in the year of assessment).

Panglima owns and operates a 720-MW combined-cycle gas-turbine power plant in Teluk Gong, Melaka, under a PPA with TNB which expires on 27 February 2023.

Media contact

Asif M Noh

(603) 7628 1175

asif@ram.com.my