MARC has affirmed its ratings on Ranhill Powertron II Sdn Bhd’s (RPII) RM90.0 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.

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 AAA_IS(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.

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.

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