RAM Ratings has reaffirmed the ratings of Tranche 1 and Tranche 2 of NUR Power Sdn Bhd’s (NUR Power or the Group) RM650 million Guaranteed Sukuk Mudharabah (2012/2027) (the Sukuk) at AAA(bg)/Stable and AAA(

Published on 31 Jul 2017.

RAM Ratings has reaffirmed the ratings of Tranche 1 and Tranche 2 of NUR Power Sdn Bhd’s (NUR Power or the Group) RM650 million Guaranteed Sukuk Mudharabah (2012/2027) (the Sukuk) at AAA(bg)/Stable and AAA(fg)/Stable, respectively. The ratings reflect irrevocable and unconditional guarantees extended by Maybank Islamic Berhad and Danajamin Nasional Berhad (collectively known as the Guarantors), which enhance the credit profile of the Sukuk beyond NUR Power’s credit strength.

NUR Power benefits from its monopoly over power supply to the Kulim Hi-Tech Park (KHTP or the Park) under a mandate of the Government of Malaysia, effective until 27 May 2033. NUR Power mainly serves industrial customers, which contribute approximately 97% of the Group’s total electricity sales. That said, growth in electricity sales to industrial customers had slowed to 1.7% in 2016 (2015: +7.1%) as several large customers reduced their loads, which had dragged the Group’s sales growth down to 2.0% in 2016 (2015: +7.1%).

Effective 1 August 2016, NUR Power is authorised by the Energy Commission to implement an incentive-based regulation (IBR) framework similar to Tenaga National Berhad’s (TNB). The IBR framework is viewed as a credit positive for NUR Power as it allows a review of electricity tariffs every 6 months to take into account changes in fuel costs via the imbalance cost pass-through (ICPT) mechanism. Essentially, the framework would enable NUR Power to pass through to its customers all cost fluctuations stemming from gas prices and energy supply rate for electricity purchases from TNB. This would help stabilise the Group’s long-term financial profile.

NUR Power maintained its commendable operating track record in the past 4 years subsequent to both its combined-cycle gas turbine blocks becoming operational, which is reflected in its healthy earnings capability. However, the Group is still exposed to sector- and customer-concentration risks. NUR Power depends on the performances of key customers engaged in high-technology industries - its top 7 customers, which collectively consumed about 84.1% of total electricity sales at the Park in fiscal 2016, are largely from the electric and electronic and solar-panel manufacturing industries that are susceptible to industry cycles and economic downturns. First Solar (M) Sdn Bhd has increased its power uptake by a further 4.6% y-o-y, cementing its position as the Group’s single-largest customer (end-March 2017: accounted for 35% of total electricity units sold).

Analytical contact
Nurhayati Sulaiman
(603) 7628 1040
yati@ram.com.my

Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my