Published on 04 February 2015
RAM Ratings has reaffirmed the AA1/Stable
rating of YTL Power International Berhad’s (YTLPI or the Group) MTN
Programme of up to RM5 billion (2011/2036). The rating continues to
reflect the Group’s stable business profile, underscored by its
diversified business base across various countries. The relatively
steady cashflow from the Group’s core utilities division, which is
underpinned by favourable long-term concession agreements, mitigates its
exposure to cyclical industries.
Meanwhile, the rating remains moderated by the
Group’s strained balance sheet and heavy debt burden. Notably, more than
half of its debt is parked under operating subsidiaries that are
self-sufficient, and these borrowings are concession-related,
ring-fenced and non-recourse to YTLPI. Given that the Group’s treasury
functions are centralised, we derive substantial comfort from its
ability to tap its subsidiaries for additional dividends.
During the review period, YTLPI’s geographical and
earnings diversity, with core long-term concession-based investments in
power, water and sewerage services in the UK, Singapore and Malaysia,
enabled the Group to maintain a strong operating and financial showing
despite some softening in the Singaporean power sector where competition
is rising. “YTLPI’s near- to medium-term earnings, nonetheless, remain
vulnerable to downside risks owing to additional generation capacity in
the Singapore electricity market as well as the imminent expiry of the
power purchase agreements of the Group’s 2 Malaysian power plants in
September 2015,” observes Davinder Kaur Gill, RAM’s Co-Head of
Infrastructure and Utilities Ratings.
To this end, the Group’s highly stable UK-based
Wessex Water Services Limited (Wessex) will continue to anchor its
earnings, despite the UK water regulator’s intention to open up the
market to competition. This move is envisaged to have minimal impact on
Wessex’s position, given its market-leading operational and regulatory
performance. “YTLPI’s sizeable cash coffers of RM8.96 billion as at
end-June 2014 further allow the Group to pursue opportunities to expand
its utilities business either locally or abroad” Gill adds.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.