RAM Ratings reaffirms AA1/P1 ratings of YTL Power International’s debt facilities

Published on 15 April 2014

RAM Ratings has reaffirmed the AA1/Stable rating of YTL Power International Berhad’s (YTLPI or the Company) MTN Programme of up to RM5 billion (2011/2036), as well as the AA1/Stable/P1 ratings of its RM2 billion CP/MTN Programme (2007/2014). YTLPI is an investment-holding company with subsidiaries involved in power generation, water and sewerage services, electricity transmission and telecommunications.

As an investment-holding company, we note that YTL Corporation Berhad (YTL Corp) dictates YTLPI’s business direction and retains its accounting and treasury function at the Group level. On the other hand, YTLPI is viewed as a strategic unit of the Group as it remains YTL Corp’s key revenue and profit spinner, contributing 76% of the Group’s top line and 50% of its profit before tax for 1H FY 2014. On this account, the credit profiles of YTL Corp and YTLPI are viewed as very closely linked. Any deterioration in YTL Corp’s credit profile would have a negative impact on YTLPI’s (and vice versa).

The ratings reflect YTLPI’s robust business profile that is underpinned by its base of regulated assets, particularly its investments in power via wholly-owned YTL Power Generation Sdn Bhd (YTLPG) in Malaysia and YTL PowerSeraya Pte Limited (YTL PowerSeraya) in Singapore as well as water and sewerage services in the UK via its indirect shareholding in Wessex Water Services Limited (WWSL), all of which have excellent operating track records. YTLPI’s investments in the relatively stable and regulated utilities sector provide it with a sturdy stream of residual cashflow in the form of dividends, which supports its company-level debts. Nonetheless, YTL Communications Sdn Bhd has been loss making over the years, though its losses have narrowed following the introduction of the 1BestariNet programme and ongoing growth of the subscriber base. 

Meanwhile, the Group’s (YTLPI and its subsidiaries) capital structure remained constrained by its hefty debt burden of RM23.4 billion as at end-December 2013, with a corresponding adjusted gearing ratio of 2.30 times. Taking into account its cash reserves of RM7.26 billion as at end-December 2013 which is free of encumbrances and will be readily available for the Company if required, its adjusted net gearing ratio works out to be 1.41 times. Nonetheless, more than 75% of the Group’s debts reside with subsidiaries that are viewed as self-sufficient; we note that these debts are concession-related, ring-fenced and non-recourse to YTLPI.

YTLPI’s appetite for acquisitions may expose it to additional operational, political, regulatory and currency risks, more so if such investments are in less developed markets and in less mature assets.

Media contact

Adeline Poh

(603) 7628 1021

adeline@ram.com.my