KUALA LUMPUR: Malaysian Rating Corporation Bhd (MARC) has affirmed its AA-IS rating on Kimanis Power Sdn Bhd's (KPSB) RM1.16 billion Sukuk Programme with a stable outlook.
MARC said the affirmed rating continues to be underpinned by the favourable terms of KPSB’s 21-year power purchase agreement (PPA) that allocates demand risk and fuel price risk to the offtaker, Sabah Electricity Sdn Bhd (SESB).
KPSB is the owner of a 285-megawatt combined-cycle gas-fired power plant at Kimanis Bay, Sabah while SESB is an 83 per cent-owned subsidiary of Tenaga Nasional Bhd, which has a senior unsecured debt rating of AAA/Stable from MARC.
“The affirmed rating is supported by the creditworthiness of KPSB’s majority shareholder, Petronas Gas Bhd and the long-term gas sale agreement with Petroliam Nasional Bhd (Petronas) until June 2029 which mitigates fuel supply risk,” MARC said in a statement today.
The power plant’s operations have continued to meet the PPA requirements in relation to heat rate and unscheduled outage rate.
The average load factor of the power plant, which currently accounts for about 19 per cent of the current installed generation capacity in Sabah, was higher at 69.7 per cent in 2016 (2015: 64.7 per cent), enabling the power plant to fully pass through its fuel costs to SESB.
Additionally, the power plant achieved average availability target of 96.6 per cent in its first contract year block of 2014 to 2016 against the PPA’s contracted average availability target requirement of 96.3 per cent.
MARC said KPSB’s capacity payments were within expectations in 2016 and first quarter 2017 while energy payments were hipgher than the budgeted amount due to a higher load factor.
In 2016, KPSB’s revenue was stable at RM198.8 million while its operating profit before interest and tax, declined sharply to RM25.9 million due largely to unrealised net foreign exchange losses arising from the fair value assessment of forward foreign exchange contracts.
KPSB’s net cash flow was negative RM66.8 million, largely as a result of a RM100 million sukuk repayment while ending cash balance declined to RM147.6 million in 2016 (2015: RM214.3 million).
As at December 31, 2016, MARC said KPSB’s finance service cover ratio stood at 2.1 times against a covenant of 1.25 times.
The stable outlook incorporates the rating agency’s expectations that KPSB would maintain its commendable plant performance within the PPA requirements.
“Downward pressure on the rating and/or outlook may occur in the event of any significant deterioration in plant performance that weakens KPSB’s debt servicing ability and/or the credit profile of SESB deteriorates,” it said.