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Posted Date: May 20, 2021

MARC has upgraded the rating on Kimanis Power Sdn Bhd's (KPSB) outstanding RM650.0 million Sukuk Programmes (sukuk) to AAIS from AA-IS. The rating outlook is stable.

The rating upgrade is premised on the consistently strong operational performance of KPSB's 285-megawatt combined-cycle gas-fired power plant at Kimanis Bay in Sabah, that has enabled the plant to meet the requirements under the power purchase agreement (PPA). This is reflected by the plant's good outage, availability and heat rate performances since 2015. The upgrade also considers the workability of KPSB's self-operating model, which has been adopted since September 2017 and backed by technical support from its ultimate parent Petroliam Nasional Berhad (PETRONAS). The paring down of KPSB's borrowings to RM648.7 million as at end-2020 from RM1.16 billion at the project's inception, assisted by the steadily amortising schedule of its sukuk series further supports the rating action.

The rating remains underpinned by KPSB's 21-year PPA under which the demand risk is allocated to the offtaker Sabah Electricity Sdn Bhd (SESB), an 83.0%-owned subsidiary of Tenaga Nasional Berhad (TNB)(AAA/Stable). The credit strength of PETRONAS Gas Berhad (PGB), which holds a 60% majority stake in KPSB, and the mitigation of gas supply risk through the long-term gas sale agreement that KPSB has with PETRONAS are positive factors.

In 2020, KPSB recorded an unplanned outage rate (UOR) of 1.10%, well within the PPA's limit of 4.00%. The plant was able to fully pass through its fuel costs on the back of good heat rate performance by its three generating blocks. On the back of the strong performance during the period, KPSB received full capacity payments of RM202.4 million. Excluding unrealised losses on its foreign exchange hedge, KPSB recorded higher pre-tax profit of RM101.7 million (2019: RM86.5 million) due to lower administrative expenses as well as financing costs. It has sufficient liquidity, with a healthy cash balance of RM146.5 million that can meet its upcoming sukuk profit payments and principal repayments totalling RM98.1 million in 2021.

Contacts:
Neo Xue Wei, +603-2717 2937/ xuewei@marc.com.my;
Lee Chi Han, +603-2717 2939/ chihan@marc.com.my;
Sharidan Salleh, +603-2717 2954/ sharidan@marc.com.my