RAM Ratings reaffirms Tanjung Bin Power's AA2 sukuk rating

Published on 17 June 2015

RAM Ratings has reaffirmed the AA2/Stable rating of Tanjung Bin Power Sdn Bhd’s (TBP or the Company) Sukuk Ijarah Programme of up to RM4.5 billion in nominal value (2012/2029) (the Sukuk). The rating continues to reflect TBP’s strong business profile, backed by the favourable terms of its Power Purchase Agreement (PPA) with Tenaga Nasional Berhad (TNB), its sole off-taker. The rating is also supported by the Company’s strong debt-coverage levels owing to robust cashflow generation and a well-matched debt-repayment profile.
TBP had seen a noticeable improvement in its operating performance during the review period, with the completion of a major overhaul of its power plant (the Plant) resulting in a healthier top line and operating cashflow. In spite of some minor losses in available capacity payments and daily utilisation payments as well as a breach of its average availability target in 2014, TBP's robust cash buffer kept its credit metrics intact. In addition, the Company managed to fully pass through its fuel cost to TNB.
Based on a stressed scenario, which includes breaches of unscheduled outage limits in certain years, TBP’s credit metrics are expected to remain intact for the remaining tenure of the Sukuk, with its minimum finance service coverage ratio (FSCR) standing at 1.65 times. In arriving at our projections, we have assumed that TBP will adhere to its financial covenants throughout the tenure of the Sukuk on a forward-looking basis, as opposed to only during the assessment year. While the Company confirmed its intention to meet annual obligations in respect of its subordinated debts, dividends to shareholders would be discretionary. As with other independent power producers (IPPs), TBP remains exposed to regulatory and single-project risks.
TBP is an IPP that has been granted the right to construct, own and operate a 2,100-MW coal-fired power plant in Tanjung Bin, Johor, under a PPA with TNB which expires on 27 September 2031.

Media contact
Wang Wai Wah
(603) 7628 1110
waiwah@ram.com.my