Monday, April 14, 2014

RAM Ratings reaffirms AA1 rating of YTL Power Generation’s debt issue





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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