MARC has affirmed its AA-IS rating on Jimah East Power Sdn Bhd’s (JEP) outstanding RM8.82 billion Sukuk Murabahah. The rating outlook is stable.
The affirmed rating incorporates JEP’s predictable cash flows from its 2×1,000-megawatt (MW) ultra-supercritical coal plant under a 25-year power purchase agreement (PPA) with Tenaga Nasional Berhad (TNB). The rating also reflects the operational and financial linkages with TNB, which has an indirect 70%-stake in JEP, and the credit strength of the project sponsors, namely TNB, Mitsui & Co., Ltd (15.0%) and The Chugoku Electric Power Co., Inc (15.0%).
During 1H2021, one of the plant’s two units recorded an unplanned outage rate between April and June 2021 which exceeded the PPA’s unplanned outage limits of 6% and 8%. Rectification work on the unit has been completed and costs incurred were mostly covered by the post-construction warranty provided by the engineering, procurement and construction consortium. JEP was able to fully pass through its fuel costs to TNB during the period.
Given the aforementioned outage issues, JEP recorded lower revenue of RM1,346.4 million in 1H2021 which was about 43.8% of full year forecast. Cash flow from operations (CFO) stood at RM458.8 million, with a moderate CFO interest coverage of 1.64x. Its liquidity position remained strong, with cash and bank balances of RM881.4 million as at December 5, 2021, more than sufficient to cover the next profit payment and principal repayment totalling RM364.6 million in June 2022. Under base case projections, JEP’s finance service ability remains adequate with minimum and average pre-distribution finance service cover ratios with cash standing at 1.40x and 1.67x.
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.
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