RAM Ratings has reaffirmed the ratings of Tranche 1 and Tranche 2 of NUR Power Sdn Bhd’s (NUR Power or the Group)

Published on 12 August 2016

RAM Ratings has reaffirmed the ratings of Tranche 1 and Tranche 2 of NUR Power Sdn Bhd’s (NUR Power or the Group) RM650 million Guaranteed Sukuk Mudharabah (2012/2027) (the Sukuk) at AAA(bg)/Stable and AAA(fg)/Stable, respectively. The ratings reflect irrevocable and unconditional guarantees extended by Maybank Islamic Berhad and Danajamin Nasional Berhad (collectively known as the Guarantors), which enhance the credit standing of the Sukuk beyond NUR Power’s credit strength.

NUR Power benefits from its monopoly over power supply to the Kulim Hi-Tech Park (KHTP or the Park) under a mandate of the Government of Malaysia until 27 May 2033.

During the review period, the Group continued to exhibit a satisfactory operational performance. Nonetheless, NUR Power’s standalone credit strength is inherently dependent on the performances of key customers that are engaged in high-technology industries. NUR Power’s top 7 customers, which collectively accounted for 83.2% of total electricity sales at the Park in fiscal 2015, are mainly from the electric and electronic and solar-panel manufacturing industries, that are susceptible to industry cycles and economic downturns. First Solar (M) Sdn Bhd further increased its uptake by 17.8% y-o-y, cementing its position as the Group’s single-largest customer (end-June 2016: 34.6% of total electricity units sold).

The Group’s margin narrowed in FY Dec 2015 by an elevated cost structure, partly attributable to scheduled maintenance expenses and increased power purchases from Tenaga Nasional Berhad (TNB). Nonetheless, implementation of incentive-based regulation, similar to TNB’s, which allows all fuel-related costs and other generation-related costs to be passed through to the customers, is viewed to be a positive development for NUR Power.

NUR Power plans to build a new plant in light of diminishing excess capacity and upward potential in customer load demands. Notably, construction plans and funding requirements have not been firmed up at this juncture. The Group’s gearing ratio may increase in the event it acquires additional financing to fund the project. Notably, further indebtedness or expansion plans are subject to the approval of the Guarantors, as per covenants of the Sukuk.

Media contact
Nurhayati Sulaiman
(603) 7628 1040
yati@ram.com.my