KUALA LUMPUR: RAM Rating Services Bhd (RAM Ratings) has affirmed the AA/Stable rating of Tanjung Bin Power Sdn Bhd’s RM4.5 billion sukuk ijarah programme given the company’s 2,100-megawatt (MW) coal-fired power plant’s satisfactory operating performance.
In a statement today, RAM Ratings said Tanjung Bin Power’s favourable power purchase agreement (PPA) with sole off-taker Tenaga Nasional Bhd
(TNB) supported its strong business profile.
"However, regulatory and single-project risks are inherent for the company, as with other independent power producers,” it said.
RAM Ratings said Tanjung Bin Power in 2022 had recorded a minor loss in available capacity payments (ACPs) of less than one per cent of full-year ACPs owing to increased forced outages that ended the plant’s extended track record of robust operational performance since 2015.
"ACPs are derived from 85 per cent of the company’s capacity rate financial (CRF) -- the cornerstone tariff that underscores its revenue. The increased outages were necessitated mainly by boiler issues,” it said.
The rating agency said that Tanjung Bin Power continued to earn extra daily utilisation payments, underpinned by the remaining 15 per cent of its CRF, in the financial year of 2022 (FY 2022).
"On the back of major overhauls in 2022 and extended planned outages in 2019, Tanjung Bin Power breached the contracted average availability target under the PPA for the recent contract-year block (2019-2022).
"This resulted in a minor availability target payment in 2023, which is not expected to dent the company’s cash flow,” it said.
RAM Ratings said that on the sukuk repayment date of Aug 16, 2022, the company’s finance service coverage ratio (FSCR, with cash balances, post-distribution) stood at 3.43 times, slightly lower than the projection.
It said this was largely attributed to a decline in cash reserves from RM1.96 billion to RM687.98 million as at end-December 2022, given higher working capital requirements due to elevated coal prices and delayed collections in FY2022.
"However, the anticipated moderation of coal prices is expected to restore working capital and normalise cash reserves.
"Moving forward, we expect the company to register annual FSCRs (without cash balances) of less than one time, indicating reliance on brought-forward cash balances to meet sukuk obligations,” it said.
RAM Ratings said that Tanjung Bin Power might opt to pay dividends to shareholders if it meets distribution covenants under the transaction, which include maintaining an FSCR (with cash balances) of at least 1.65 times after distribution.
"Our stressed cash flow projections (which considered lower distribution payments, among other assumptions) indicate that the company will be able to achieve the respective minimum and average annual FSCRs (with cash balances, post-distribution) of 1.65 times and 2.39 times during the tenure of the sukuk,” it added. - Bernama
