Posted Date: May 19, 2020

MARC has affirmed its AA-IS rating on Kimanis Power Sdn Bhd's (KPSB) RM1,160.0 million Sukuk Programme (sukuk) with a stable outlook.
KPSB owns and operates a 285-megawatt (MW) combined-cycle gas-fired power plant in Kimanis Bay, Sabah. The rating affirmation reflects the favourable power purchase agreement (PPA) that allocates demand risk to the offtaker Sabah Electricity Sdn Bhd (SESB), an 83.0%-owned subsidiary of Tenaga Nasional Berhad (TNB) (AAA/Stable).The rating also incorporates the credit strength of PETRONAS Gas Berhad (PGB), a major shareholder in KPSB, and the mitigation of gas supply risk through the long-term gas sale agreement that KPSB has with PETRONAS.

KPSB plant's performance continued to remain well within the PPA requirement with a cumulative unplanned outage rate (UOR) of 1.5% against the PPA's limit of 4.0% and contract average availability target (CAAT) for the second contract year block (2017-2019) of 94.49% against the PPA requirement of above 93.08%. Similarly, the plant managed to fully pass through its fuel cost as the heat rates were within the PPA requirement.

For 2019, KPSB received full capacity payments of RM202.4 million. It recorded pre-tax profit of RM86.5 million (2018: RM98.2 million) on excluding unrealised gains; the lower profit was due to higher administrative expenses incurred last year. Cash flow from operations (CFO) remained strong at RM174.2 million with a healthy cash balance of RM186.9 million. As at end-January 2020, KPSB's designated accounts had an outstanding balance of RM163.1 million, which is sufficient to meet its upcoming repayments of RM70.0 million for Series 1 in August 2020 and RM10.0 million for Series 2 each in June and December 2020.

The stable outlook is premised on MARC's expectation that KPSB will maintain its plant performance and cash flow generation. Should the plant continue to achieve key performance metrics that are well within the PPA requirements, the outlook and/or rating could be upgraded. An unexpected weakness in plant performance that would impact KPSB's debt servicing ability, or a change to SESB's ownership structure and credit profile could lead to rating pressures.

Chia Kah Yie, +603-2717 2961/ kahyie@marc.com.my;
Sharidan Salleh, +603-2717 2954/ sharidan@marc.com.my

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