RAM Ratings Reaffirms AA2(s)/Stable Rating of Sarawak Power Generation's Sukuk

Transcription

1. IB ​ ​Press​ ​Release​ ​Service Published​ ​on:​​ ​IslamicBanker.com​ ​Publications:​ ​https://www.islamicmarkets.com/publications RAM​ ​Ratings​ ​Reaffirms​ ​AA2(s)/Stable​ ​Rating of​ ​Sarawak​ ​Power​ ​Generation's​ ​Sukuk 25​ ​October​ ​2017 RAM​ ​Ratings​ ​has​ ​reaffirmed​ ​the​ ​AA2(s)/Stable​ ​rating​ ​of​ ​Sarawak​ ​Power​ ​Generation​ ​Sdn​ ​Bhd's (SPG​ ​or​ ​the​ ​Company)​ ​RM215​ ​million​ ​Serial​ ​Sukuk​ ​Musharakah​ ​(2006/2021)​ ​(the​ ​Sukuk).​ ​The enhanced​ ​rating​ ​reflects​ ​support​ ​for​ ​the​ ​Company​ ​from​ ​the​ ​larger​ ​Sarawak​ ​Energy​ ​Berhad Group​ ​(SEB​ ​or​ ​the​ ​Group)​ ​which​ ​owns​ ​the​ ​Company​ ​via​ ​its​ ​wholly​ ​owned​ ​subsidiary​ ​SEB​ ​Power Sdn​ ​Bhd. Syarikat​ ​SESCO​ ​Berhad​ ​(SESCO),​ ​a​ ​wholly​ ​owned​ ​subsidiary​ ​of​ ​SEB​ ​and​ ​SPG's​ ​sole​ ​offtaker, had​ ​provided​ ​various​ ​forms​ ​of​ ​assistance​ ​to​ ​the​ ​Company​ ​in​ ​the​ ​past.​ ​Support​ ​was​ ​evident​ ​most recently​ ​in​ ​2015​ ​when​ ​SESCO​ ​allowed​ ​SPG​ ​to​ ​reset​ ​the​ ​rolling​ ​Equivalent​ ​Availability​ ​Factor (EAF)​ ​of​ ​Unit​ ​8​ ​of​ ​its​ ​plant​ ​(the​ ​Plant)​ ​to​ ​enable​ ​the​ ​Company​ ​to​ ​minimise​ ​reductions​ ​in​ ​capacity revenue​ ​under​ ​the​ ​terms​ ​of​ ​its​ ​Power​ ​Purchase​ ​Agreement​ ​(PPA).​ ​Such​ ​assistance​ ​is​ ​further backed​ ​by​ ​a​ ​Letter​ ​of​ ​Support​ ​(LoS)​ ​extended​ ​by​ ​SESCO​ ​to​ ​SPG,​ ​dated​ ​24​ ​September​ ​2007,​ ​in which​ ​the​ ​former​ ​undertakes​ ​to​ ​ensure​ ​that​ ​the​ ​Company​ ​fully​ ​and​ ​promptly​ ​meets​ ​all​ ​its financial​ ​obligations​ ​in​ ​respect​ ​of​ ​the​ ​Sukuk​ ​throughout​ ​the​ ​tenure​ ​of​ ​the​ ​facility. SPG​ ​earns​ ​full​ ​Capacity​ ​Payments​ ​as​ ​long​ ​as​ ​both​ ​units​ ​of​ ​the​ ​Plant​ ​maintain​ ​a​ ​dependable capacity​ ​of​ ​105MW​ ​and​ ​a​ ​minimum​ ​EAF​ ​of​ ​85%,​ ​regardless​ ​of​ ​the​ ​amount​ ​of​ ​electricity​ ​sold. However,​ ​Unit​ ​9​ ​earns​ ​Energy​ ​Payments​ ​on​ ​a​ ​take-and-pay​ ​basis. While​ ​the​ ​Plant's​ ​performance​ ​had​ ​improved​ ​in​ ​2016,​ ​Units​ ​8​ ​and​ ​9​ ​continued​ ​to​ ​face operational​ ​challenges​ ​in​ ​1H​ ​FY​ ​Dec​ ​2017.​ ​Nevertheless,​ ​our​ ​sensitised​ ​cashflow​ ​projections indicate​ ​that​ ​SPG's​ ​minimum​ ​Sukuk​ ​Service​ ​Coverage​ ​Ratio​ ​(with​ ​cash​ ​balances, post-distribution,​ ​calculated​ ​over​ ​a​ ​12-month​ ​period​ ​on​ ​semi-annual​ ​principal​ ​repayment​ ​dates) (SSCR)​ ​will​ ​remain​ ​robust​ ​at​ ​around​ ​1.50​ ​times​ ​between​ ​December​ ​2017​ ​and​ ​June​ ​2021.​ ​While a​ ​hefty​ ​capex​ ​for​ ​the​ ​refurbishment​ ​of​ ​Unit​ ​8​ ​is​ ​expected​ ​to​ ​be​ ​incurred​ ​in​ ​2021,​ ​the​ ​Company has​ ​represented​ ​that​ ​it​ ​will​ ​prioritise​ ​its​ ​sukuk​ ​obligations​ ​over​ ​capex​ ​payments,​ ​repayments​ ​of advances​ ​to​ ​SEB​ ​and​ ​dividend​ ​distributions. Typical​ ​of​ ​independent​ ​power​ ​producers,​ ​SPG​ ​is​ ​exposed​ ​to​ ​single-project​ ​risk.​ ​Additionally,​ ​the operations​ ​and​ ​maintenance​ ​(O&M)​ ​arrangement​ ​outlined​ ​in​ ​the​ ​PPA​ ​covers​ ​only​ ​broad​ ​issues of​ ​responsibility​ ​and​ ​compensation.​ ​Nevertheless,​ ​the​ ​absence​ ​of​ ​a​ ​formal​ ​O&M​ ​agreement between​ ​SPG​ ​and​ ​SESCO​ ​is​ ​unlikely​ ​to​ ​give​ ​rise​ ​to​ ​any​ ​dispute,​ ​given​ ​the​ ​Group's​ ​strong commitment,​ ​as​ ​evidenced​ ​in​ ​the​ ​past.
2. IB ​ ​Press​ ​Release​ ​Service Published​ ​on:​​ ​IslamicBanker.com​ ​Publications:​ ​https://www.islamicmarkets.com/publications SPG​ ​holds​ ​the​ ​licence​ ​to​ ​build,​ ​own​ ​and​ ​operate​ ​a​ ​320​ ​MW​ ​combined-cycle​ ​gas​ ​turbine​ ​facility in​ ​Tanjung​ ​Kidurong,​ ​Bintulu,​ ​Sarawak. Organisation​ ​Name: News​ ​Type: RAM​ ​Rating​ ​Services​ ​Berhad RATING​ ​ANNOUNCEMENT Source: BNM​ ​Announcements Media​ ​Contact Padthma​ ​Subbiah (603)​ ​7628​ ​1162 padthma@ram.com.my Disclaimer: 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​ ​analysis​ ​and​ ​commentaries,​ ​where​ ​relevant.