Published on 11 April 2014
RAM Ratings has reaffirmed the
AA1/Stable rating of YTL Power Generation Sdn Bhd’s (YTLPG or the Company)
RM1.3 billion MTN Programme (2003/2014). The rating reflects YTLPG’s strong
business profile as its power business is protected from demand risk by its
power purchase agreement with Tenaga Nasional Berhad, as well as its
monopolistic water and sewerage business in the UK that operates through a
perpetual concession under a stable and transparent regulatory regime. Both
businesses boast commendable operating track records.
YTLPG is a wholly-owned
subsidiary of YTL Power International Berhad (YTLPI), an investment-holding
company and the utilities business arm of YTL Corporation Berhad. We note that
YTLPI dictates the Company’s business direction and practises central treasury
management at YTLPI group level. The Company is one of YTLPI’s key revenue and
profit generators, contributing about 22% and 63% of YTLPI’s revenue and
profit, respectively, in FY June 2013. On this account, the credit profiles
of the Company and YTLPI are viewed as closely linked. Any deterioration in
YTLPG’s credit profile would have a negative impact on that of the latter (and
vice versa).
As with all concession-based
businesses, the power and water and sewerage businesses are exposed to
regulatory risk. The UK Water Services Regulation Authority’s recently
published guidance sets the rate of return that companies can earn on their
assets at 3.85% over the next 5-year regulatory period. Additionally, extra
pressure is envisaged to stem from retail competition in the sector, commencing
in 2017. Nevertheless, these plans are currently under development and will
only be finalised in January 2015.
YTLPG is an independent power
producer as well as the indirect owner of Wessex Water Services Limited – a
water and sewerage company in the UK – following the Company’s acquisition of
YTL Utilities Limited from YTLPI.
Media contact
Asif M Noh
(603) 7628 1175
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