RAM Ratings reaffirms AA1/stable rating of Ranhill Powertron’s IMTN Programme

Published on 22 November 2013

RAM Ratings has reaffirmed the AA1/stable rating of Ranhill Powertron Sdn Bhd’s (Ranhill Powertron or the Company) RM540 million IMTN Programme (IMTN). Ranhill Powertron is an independent power producer (IPP) that operates a 190-MW combined-cycle, gas-turbine power plant (the Plant) in Kota Kinabalu, Sabah, under a 21-year power-purchase agreement (PPA) with Sabah Electricity Sdn Bhd. The reaffirmation of the rating is premised on the favourable terms of the PPA, the Plant’s overall satisfactory operating track record and the strong debt-servicing ability of the Company.

During the period under review, Ranhill Powertron’s operating performance remained satisfactory, earning full capacity payments (CP) and operating within its allowed heat rates. That said, 2 of its 4 gas turbines recently experienced technical malfunctions in 2 separate incidents. One of the malfunctioned gas turbine is already in operation while the other gas turbine is expected to be fully operational by end-December 2013. We note that the Company’s 2 other gas turbines were unaffected and are still operating. While investigations of the incidents have yet to be completed, we do not expect any material cashflow losses that would impact Ranhill Powertron’s debt-servicing capability as the repair costs are expected to be fully covered either under warranty or insurance.

As at its last principal repayment date (27 June 2013), Ranhill Powertron had achieved a Finance Service Cover Ratio (FSCR) of 2.83 times (with cash balances, post-distribution), underscored by a healthy cash holding of RM235 million. Based on RAM’s sensitised cashflow projections, the Company is expected to achieve a strong minimum FSCR (with cash balances, post-distribution and measured on principal repayment dates) of at least 1.82 times, commensurate with its debt rating. As with other IPPs, however, Ranhill Powertron is exposed to regulatory and single-project risks.

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Lim Chern Yit

(603) 7628 1035

chernyit@ram.com.my