MARC Ratings has affirmed its AA-IS rating on Konsortium KAJV Sdn Bhd’s (KAJV) RM1.0 billion Sukuk Wakalah Programme with a stable outlook.
The rating is anchored by Terengganu’s sub-sovereign AA-/Stable rating and its capacity to meet payment obligations on Facility Payment Certificates (FPC) issued to KAJV for completed works on the Kuala Terengganu Utara water supply project. The project comprises a 120-million litres per day (MLD) conventional water treatment plant (WTP), a 28-MLD membrane WTP, retrofitting of existing WTPs, and associated works.
On 24 December 2025, the Terengganu state government approved a further extension (EOT No.9), revising the completion deadline to 10 July 2026 from 31 May 2025. The project subsequently achieved 100% physical completion on 25 May 2026. KAJV has since submitted a request for the issuance of the Certificate of Practical Completion and is currently awaiting the state government’s approval.
Notwithstanding the delays, sukukholders remain insulated from construction and termination risks. Each issuance is backed by approved FPCs for completed works, representing unconditional, irrevocable and non–set-off payment obligations of the Terengganu state government, irrespective of project delays or termination. These structural features underpin the rating. To date, KAJV has received seven deferred payments of RM108.8 million each from the Terengganu state government, with all payments received on time except for one, which was delayed by approximately one month due to administrative issues. Under the rating case, KAJV is projected to remain compliant with the 1.25x finance service cover ratio (FSCR) covenant over the remaining sukuk tenure, with minimum and average FSCRs of 2.6x and 3.1x.
Although the final deferred payment of RM108.8 million from the state government is due in June 2031, ahead of the final RM90.0 million sukuk maturity in May 2032, liquidity is expected to remain adequate, underpinned by sufficient balances in facility agent–controlled designated accounts to meet the final obligation.