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RAM Ratings reaffirms Manjung Island Energy’ sukuk ratings

IM Press Release
By IM Press Release
5 years ago
RAM Ratings reaffirms Manjung Island Energy’ sukuk ratings


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  1. IM Press Release Service Published on :​ ​IslamicMarkets.com Publications: ​https://islamicmarkets.com/publications RAM Ratings reaffirms Manjung Island Energy’ sukuk ratings 14 December 2018 RAM Ratings has reaffirmed the AAA/Stable rating of Manjung Island Energy Berhad’s (MIEB) RM3.86 billion Islamic Securities (2011/2030) (Series 1) as well as the enhanced AAA(s)/Stable rating of its RM990 million Islamic Securities (2011/2031) (Series 2). The rating reaffirmation for Series 1 is based on TNB Janamanjung Sdn Bhd’s (TNBJ or the Company) strong cashflow-generating capability and superior cash buffer vis-à-vis MIEB’s financial obligations. TNBJ is the sole source of cashflow for MIEB, a trust-owned special-purpose vehicle established to raise funding for the construction of a 1,010-MW coal-fired power plant (GF2), which is located next to the 2,100-MW coal-fired Sultan Azlan Shah power plant in Perak (GF1) (collectively, the Facilities). Given this, we recognise the strong credit link between MIEB and TNBJ and view both companies in aggregate. Meanwhile, the reaffirmation of the enhanced rating of Series 2 reflects the credit strength of the irrevocable and unconditional corporate guarantee from Tenaga Nasional Berhad (TNB). Both GF1 and GF2 demonstrated substantial operational improvements in the first eight months of 2018, in contrast to the multiple operational challenges they had faced in the past. This is evident from TNBJ’s ability to claim full Available Capacity Payments (ACPs) over the same period, as opposed to a multitude of ACP losses in the last five years. The better performance is attributable to various improvements at the Facilities and the procurement of better quality coal in the recent years. Based on RAM’s sensitised cashflow projections, the Company’s minimum and average FSCRs (with cash balances, post-distribution) are expected to remain robust at a respective 2.00 and 5.01 times throughout the tenure of Series 1, even after taking into account some assumed outages and sizeable redemptions of redeemable preference shares. The Company’s robust debt coverage is underpinned by its substantial cash holdings accumulated over the past decade of GF1’s operations, a well-matched debt-repayment profile and the stringent covenants under Series 1. Meanwhile, Series 2 has been structured with a RM990 million bullet repayment on 25 November 2031, which TNBJ is anticipated to be able to meet given that it has ample room to accumulate cash and manage its distributions to ensure the fulfilment of its financial obligations under Series 2. As with other independent power producers, TNBJ is exposed to force majeure and regulatory risks.
  2. IM Press Release Service Published on :​ ​IslamicMarkets.com Publications: ​https://islamicmarkets.com/publications Organisation Name: RAM Rating Services Berhad News Type: RATING ANNOUNCEMENT Source: https://www.ram.com.my/pressrelease/?prviewid=4802 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.