Posted Date: May 24, 2021

MARC has affirmed its ratings on Ranhill Powertron II Sdn Bhd's (RPII) RM90.0 million outstanding Islamic Medium-Term Notes (IMTN) at AAIS and RM350.0 million outstanding guaranteed IMTN at AAAIS(fg). The ratings outlook is stable.

The AAIS rating reflects favourable terms under the Power Purchase Agreement (PPA) which allocate demand risk and fuel price risk to the offtaker, Sabah Electricity Sdn Bhd (SESB), an 83%-owned subsidiary of Tenaga Nasional Berhad (TNB). The rating also incorporates the power plant's commendable operating performance to date and its ability to generate operating cash flow (CFO) to achieve minimum and average pre-distribution FSCRs of 2.52x and 2.60x over the next two years (2021–2022). The rating on the guaranteed IMTN of AAAIS(fg) reflects the unconditional and irrevocable Kafalah guarantee provided by Danajamin Nasional Berhad on which MARC has a long-term counterparty credit rating of AAA/stable.

RPII owns and operates the 190MW combined-cycle gas turbine Rugading Power Station in Sabah under a 21-year PPA with SESB. The plant's cumulative unplanned outage rate (UOR) in 2020 was 2.96%, well within the unplanned outage limit (UOL) of 4.0%. Accordingly, RPII received full capacity payments of RM97.5 million and achieved full fuel cost pass through on meeting the heat rate requirement.
Receivables collection from SESB has not been timely; as a result, CFO was lower at RM53.3 million in 2020 (2019: RM104.5 million). Despite the delay, any amount overdue has not exceeded 60 days. Its liquidity stood at RM87.5 million at end-2020, which would be sufficient to meet the IMTN repayment of RM50.0 million in June 2021. The final repayment of RM40 million for the tranche 1 IMTN is in June 2022.

The CFO will decline from 2023 onwards due to the step-down in the capacity rate financial (CRF) from the current RM36.50 kW/month to RM23.80 kW/month. However, this will occur after the non-guaranteed IMTN is fully repaid and when the guaranteed IMTN begins its repayments. Any concern on cash flow coverage following the step-down of the CRF will be mitigated by RPII's liquidity position. Notwithstanding this, the interest of the sukukholders of the guaranteed IMTN is protected under the Kafalah guarantee from Danajamin.

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