RAM Ratings revises outlook on rating of Special Power Vehicle’s Class A IMTN to stable, reaffirms A1 rating

Published on 31 March 2015

RAM Ratings has revised the outlook on the A1 rating of Special Power Vehicle Berhad’s (SPV or the Company) RM800 million Class A IMTN (2005/2022) (Class A IMTN or the Sukuk) to stable from negative as its cashflow has improved significantly owing to RM321 million of tax savings arising from additional capital allowances recently obtained by Jimah Energy Ventures Sdn Bhd (JEV). Under SPV’s financing structure, the Company relies solely on JEV’s residual cashflow to meet its financing obligations. Apart from the tax savings, JEV had also recently received compensation of RM60.4 million from its operation and maintenance operator (a joint venture between Jimah O&M Sdn Bhd and Jimah Teknik Sdn Bhd), which had not previously been included in our sensitised cashflow projections. In combination, these cashflows are expected to avert SPV’s potential liquidity stress previously anticipated to occur towards the end of the Class A IMTN’s tenure.

In 2012, the rating of the Class A IMTN had been revised to negative due to SPV’s weaker cashflow as a result of JEV’s higher-than-expected capital spending and profit payments made in respect of the Class B IMTN, both of which resulted in reduced residual cashflow available to SPV. Accordingly, we had expected SPV to face liquidity stress in 2020. In November 2014, RAM had maintained the negative outlook on the rating, premised on a refinancing exercise which had almost been finalised then but was subsequently put on hold.

Based on our revised projections which have taken into consideration SPV’s current policy of profit payments on its RM215 million Class B IMTN (Class B IMTN), the Company’s minimum and average sub-finance service coverage ratios (with cash balances, post-distribution, calculated on payment dates) are now deemed adequate at 1.25 times and 1.31 times, respectively. However, higher-than-projected profit payments on the Class B IMTN or unexpected expenditure at JEV throughout the remaining tenure of the Class A IMTN would warrant a reassessment of the rating. Similarly, any subsequent changes to tax rulings which would affect JEV’s tax computation or a clawback of the capital allowance would also require the rating to be reassessed.

SPV was set up as a funding conduit to part-finance the development of JEV’s 1,400-MW coal-fired power plant (the Plant) in Port Dickson, Negeri Sembilan. JEV had issued 2 debt programmes – a RM4.85 billion Senior IMTN Facility (2005/2025) (Senior IMTN) (rated AA3/Stable) and an unrated RM895 million Junior Debt programme (2005/2034) – to finance the Plant. The latter is fully subscribed for by SPV (via the issuance of Class A and Class B IMTN) and is subordinated to the Senior IMTN.

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Adeline Poh
(603) 7628 1021
adeline@ram.com.my