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Press Release
14 May | Tuesday
RAM Ratings reaffirms Tanjung Bin Power’s AA2 sukuk rating
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 bil in nominal value (2012/2029) (the Sukuk). The rating continues to reflect TBP's robust debt-coverage levels owing to its strong cashflow and a well-structured sukuk repayment profile. The rating is also supported by the Company’s strong business profile, backed by the favourable terms of its Power Purchase Agreement (PPA) with Tenaga Nasional Berhad (TNB), its sole off-taker. As with other independent power producers (IPPs), however, TBP remains exposed to regulatory and single-project risks.
 
TBP’s power plant (the Plant) has been delivering a strong operational performance in the last four years, following various improvements since 2014. The Plant has been operating within the PPA’s unscheduled outage limit of 6% since October 2014, thus entitling TBP to full Available Capacity Payments (ACPs) over the same period. The Company has also managed to fully pass through its fuel costs to TNB. While its rolling 365-day unscheduled outage rate1 (UOR1) went up to 5.1% in fiscal 2018 from 2.8% the year before, this was primarily due to extended maintenance works to assess the health of the Plant’s boiler tubes. Otherwise, no major outage was observed during the year. 
 
In the absence of scheduled principal repayments, TBP’s stronger-than-expected finance service coverage ratio (FSCR, with cash balances, post-distribution) of 12.21 times as at the latest sukuk repayment date of 16 February 2019 was primarily due to its healthier operational showing. This was despite a larger-than-expected dividend distribution of RM400 mil. While our sensitivity analysis continues to assume revenue losses arising from plant outages, the Company’s debt-servicing capability is anticipated to remain intact, with projected minimum and average annual FSCRs (with cash balances, post-distribution) of a respective 1.65 and 3.00 times throughout the tenure of the Sukuk based on RAM’s sensitised case. With respect to distributions to shareholders, TBP has represented that it will adhere to the distribution covenants on a forward-looking basis throughout the tenure of the Sukuk, as opposed to only in the year of assessment.
 
TBP is an IPP that owns and operates a 2,100 MW coal-fired power plant in Tanjung Bin, Johor, under a 25-year PPA with TNB that expires in September 2031.
 
Analytical contact
Nurhayati Sulaiman
(603) 3385 2582
yati@ram.com.my
 
Media contact
Padthma Subbiah
(603) 3385 2577
padthma@ram.com.my
 
Date of release: 14 May 2019
 
The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.
 
RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.
 
Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.
 
Published by RAM Rating Services Berhad
Copyright 2019 by RAM Rating Services Berhad
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