MARC has affirmed its ratings on Ranhill Powertron II Sdn Bhd’s (RPII) RM140.0 million outstanding Islamic Medium-Term Notes (IMTN) at AA_IS and RM350.0 million outstanding guaranteed IMTN at AAA_IS(fg). The ratings outlook is stable.

RPII owns and operates the 190-MW combined-cycle gas turbine (CCGT) Rugading Power Station in Sabah under a 21-year Power Purchase Agreement (PPA) with Sabah Electricity Sdn Bhd (SESB). The AAA_IS(fg) rating on the guaranteed IMTN reflects the unconditional and irrevocable Kafalah guarantee provided by Danajamin Nasional Berhad (Danajamin) (AAA/Stable). The standalone AA_IS rating reflects favourable terms under the PPA which allocates demand risk and fuel price risk to the offtaker, SESB in which Tenaga Nasional Berhad (TNB; AAA/Stable) has an 83%-interest. The stable outlook on the non-guaranteed notes reflects MARC’s expectation that RPII’s power plant will continue to maintain its operational performance and that the company will continue to adhere to prudent financial management.

For the third contract year block (2017–2019), RPII achieved a contract average availability target (CAAT) of 94.2% against the minimum PPA requirement of 94.0%. The plant’s unplanned outage rate (UOR) and heat rate were well within the PPA requirement. As such, RPII received full CP of RM97.3 million and fully passed through its fuel costs to SESB with energy payments (EP) of RM105.4 million. Cash flow from operations (CFO) stood at RM104.4 million. RPII has cash and bank balances of RM112.1 million as at end-January 2020 which would be sufficient to service its upcoming IMTN obligation of RM50.0 million in June 2020.

Based on cash flow projections, RPII’s minimum and average pre-distribution finance service cover ratios (FSCR) stand at 2.36x and 2.68x. The capacity rate financial (CRF) will reduce to RM23.80/kW/month from RM36.50/kW/month beginning 2023 onwards, after the non-guaranteed IMTN is fully repaid and when the guaranteed IMTN starts its repayments. Any concerns on cash flow coverage following the step-down of the CRF is expected to be alleviated by RPII’s liquidity position. Notwithstanding this, the interest of the sukukholders of the guaranteed IMTN is protected under the Kafalah guarantee provided by Danajamin.

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