MARC Affirms AA-IS Rating on Tanjung Bin O&m Berhad's Rm470.0 Million Islamic Securities
MARC Affirms AA-IS Rating on Tanjung Bin O&m Berhad's Rm470.0 Million Islamic Securities
Ard, Islam, Mal, Wakalah
Ard, Islam, Mal, Wakalah
Transcription
- 8 /1/2016 Latest Announcement - (News ID : 2016080100012) Latest Announcement News ID : 2016080100012 Subject : TANJUNG BIN O&M BERHAD TANJUNG BIN O&M BERHAD Organisation Name: MALAYSIAN RATING CORPORATION News Type: RATING ANNOUNCEMENT Reference Site: None Embargo Date: 01/08/2016 Embargo Time: 02:45 PM Expiry Date: 15/08/2016 Priority: Medium Summary: MARC AFFIRMS AAIS RATING ON TANJUNG BIN O&M BERHAD'S RM470.0 MILLION ISLAMIC SECURITIES Attachments: No attachment available. Disclaimer: The user, including a user who is also a FAST Participant, expressly agrees that the use of this website which is accessible at https://fast.bnm.gov.my/ is at the user's sole risk. The information contained in this FAST website is compiled by MyClear Sdn. Bhd. (MyClear) and is provided on an "as is" basis without any representations or warranties of any kind, either expressed or implied. While MyClear makes every effort to ensure that information contained in the FAST website are accurate and disseminated in a timely and efficient manner, the user acknowledges that delays, errors, omissions or inaccuracies may occur. MyClear disclaims any liability pertaining to the consequences of any delays, errors, omissions or inaccuracies arising out of or relating to the FAST website or information, including but not limited to, any decision made or action taken by a user in reliance upon such information, or for damages suffered, whether direct, consequential, special, punitive, indirect or otherwise, notwithstanding having been advised of the possibility of such damages. In the event of any dispute, the official records of MyClear shall prevail. MyClear, Bank Negara Malaysia or any of its affiliates, officers, directors, agents or any other party involved in creating, producing or delivering the FAST website, shall not be liable for any direct, consequential, special, punitive, indirect, incidental or other damages arising out of or in any way connected with the use or inability to use the FAST website or information, whether based on contract, tort, liability or otherwise, even if advised on the possibility of any such damages. Content MARC has affirmed its AAIS rating on Tanjung Bin O&M Berhad's (Tanjung Bin O&M) RM470.0 million Islamic Securities (Sukuk Wakalah) with a stable outlook. Tanjung Bin O&M is the operations and maintenance (O&M) provider of the 2,100megawatt (MW) coalfired power plant owned by related company Tanjung Bin Power Sdn Bhd (TBP) under the O&M agreement (OMA). Tanjung Bin O&M has transferred key operational obligations under the OMA to parent company Malakoff Power Berhad (MPower) through a subOMA. Both the OMA and subOMA are coterminous with the 25year power purchase agreement between TBP and Tenaga Nasional Berhad (TNB). The rating is underpinned by the strength of the unconditional and irrevocable cash deficiency support from MPower to top up any shortfall in Tanjung Bin O&M's finance service reserve account (FSRA) to meet the minimum required balance. MARC has a senior unsecured rating of AA/Stable on MPower. The rating incorporates Tanjung Bin O&M's sufficient cash flow coverage on the back of satisfactory operational performance of the TBP plant. For 2015, the plant's average capacity factor of 77.0% was lower than the 2014 capacity factor of 83.2%. This was mainly attributed to the additional scheduled outage allocated for major maintenance works under the boiler improvement programme which was completed in early2016. However, Tanjung Bin O&M did not incur any liquidated ascertained damages (LAD) penalty as the TBP plant met performance requirements relating to heat rate, unscheduled outage limit and contracted average availability target (CAAT). For 1Q2016, TBP's operating results indicate that its plant's performance is on course to recover to levels before experiencing prolonged outages in 2013 for which MPower provided a oneoff undertaking to fund the LAD incurred by Tanjung Bin O&M as well as help cover maintenance expenses of TBP's boiler improvement programme. MARC also opines that TBP's significant generation capacity, competitive secondtier capacity rate financial from 2019 onwards and its cheaper generation cost compared to a gasfired plant will continue to support TBP's high dispatch merit order. For 2015, Tanjung Bin O&M's revenue decreased by 3.2% to RM313.1 million in line with the plant's lower net electrical output. Coupled with the high maintenance costs in 2015, the company registered operating profit before interest, tax, depreciation and amortisation (OPBITDA) of RM3.0 million (2014: RM87.9 million). However, Tanjung Bin O&M's cash flow from operations improved to RM91.0 million in 2015 (2014: RM74.9 million) and is sufficient to cover the finance service obligations of RM70.6 million in the corresponding period. Meanwhile, Tanjung Bin O&M's current ratio of 0.48 times reflects the company's nontrade payables due to MPower and Malakoff of RM214.5 million which represent 36.6% of the total current liabilities in 2015 (2014: 39.6%). The rating agency is of the view that the parent companies are not likely to make an immediate claim on these payables in light of Tanjung Bin O&M's sukuk obligations in 2016 and 2017. As at December 31, 2015, the company's balance sheet cash of RM167.4 million provides comfortable coverage against its financing obligations for 2016 which are estimated at RM74.6 million. Based on the latest cash flow projections, Tanjung Bin O&M's minimum predistribution finance service cover ratio (FSCR) with cash balance stands at 3.64 times throughout the sukuk tenure. MARC's sensitivity analysis demonstrates that the company would still be in compliance with the minimum covenanted FSCR of 1.25 times under moderate reduction in plant average capacity factor provided that Tanjung Bin O&M pays lower dividends in the years when sizeable sukuk repayments need to be made. Tanjung Bin O&M's FSCR would fall below 1.00 time in 2026 when MARC ran a sensitivity analysis with the average capacity factor below 60%. In this regard, MARC expects MPower to inject sufficient funds into Tanjung Bin O&M's FSRA to meet the sukuk repayment under the cash deficiency support mechanism. The stable outlook reflects the rating agency's expectations that TBP's plant performance will improve to satisfactory levels. The rating and outlook of the Sukuk Wakalah is sensitive to changes in the credit profile of MPower which has provided the cash deficiency support. Contacts: Ng Chun Kean, +6032082 2230/ chunkean@marc.com.my ; David Lee, +6032082 2255/ david@marc.com.my. August 1, 2016 [This announcement is available in the MARC corporate homepage at http://www.marc.com.my] DISCLAIMER This communication is provided by Malaysian Rating Corporation Berhad (MARC) on the basis of information believed by MARC to be accurate and reliable as derived from publicly available sources or provided by the rated entity or its agents. MARC, however, has not independently verified such information and makes no representation as to the accuracy or completeness of such information. Any assignment of a credit rating by MARC is solely to be construed as a statement of its opinion and not a statement of fact. A credit rating is not a recommendation to buy, sell, or hold any security. © 2016 Malaysian Rating Corporation Berhad https://fast.bnm.gov.my/fastweb/public/PublicInfoServlet.do?chkBox=2016080100012&mode=DISPLAY&info=NEWS&screenId=PB010400 1/1
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