MARC Ratings has affirmed its AAIS rating on Kimanis Power Sdn Bhd’s (KPSB) outstanding sukuk of RM585.0 million with a stable outlook.
The rating affirmation reflects KPSB’s steady cash flow generation attributed to the consistent performance of its plant that has continued to exceed the minimum requirements under its Power Purchase Agreement (PPA). Demand risk under the PPA is mitigated as KPSB is entitled to full capacity payments (CP) from offtaker Sabah Electricity Sdn Bhd (SESB), an 83%-owned subsidiary of Tenaga Nasional Berhad (AAA/Stable), on meeting performance metrics. The rating also incorporates the credit strength of PETRONAS Gas Berhad, a major shareholder in KPSB, and the mitigation of gas supply risk through a long-term gas sale agreement that KPSB has with Petroliam Nasional Berhad (PETRONAS).
The operational metrics of KPSB’s plant remained strong in 2021. The plant registered a rolling unplanned outage rate (UOR) of 1.3% during the year, well within the PPA limit of 4.0%. As a result, KPSB received the full CP of RM202.3 million. The plant achieved full fuel cost pass-through as its monthly heat rates remained lower than the PPA-stipulated heat rates, with this, KPSB received energy payments of RM120.8 million.
Cash flow from operations remained strong at RM167.2 million during the year. Cash and cash equivalents stood at RM178.6 million as at end-March 2022, against its upcoming financial obligation of RM16.1 million in June 2022. Based on the cash flow projections, KPSB’s minimum and average pre-distribution finance service cover ratio (FSCR) would stand at 2.69x and 4.12x. Our sensitivity analysis reveals that KPSB will be able to withstand moderate stress scenarios of heat rate degradation, increase in operating costs and reduction in plant availability.