MARC Ratings has affirmed its AAIS rating on Kimanis Power Sdn Bhd’s (KPSB) outstanding RM485.0 million Sukuk Programme. The outlook on the rating is stable.
KPSB’s 285MW combined-cycle gas plant has continued to perform in line with our expectations, meeting all stipulated requirements under its 21-year power purchase agreement (PPA) with offtaker, Sabah Electricity Sdn Bhd (SESB). In 2022, the plant registered a rolling unplanned outage rate of 1.93% during the year, well within the PPA limit of 4.0%. As a result, it received full capacity payments of RM203.0 million. Heat rates also remained lower than the PPA-stipulated heat rates, allowing KPSB to fully pass through its fuel costs. Higher energy payments of RM148.5 million were received on the back of higher output during the year (2021: RM120.8 million).
KPSB’s steady operational performance translated to continued strong cash flow generation, with cash flow from operations of RM224.3 million (2021: RM197.7 million). Cash and bank balances remained healthy at RM171.2 million as at end-December 2022, against total sukuk obligations of RM110.3 million in 2023. Based on the cash flow projections, KPSB’s minimum and average pre-distribution finance service cover ratios would stand at 2.57x and 4.09x. Our sensitivity analysis demonstrates that KPSB would be able to withstand moderate stress scenarios, including a combined scenario of 2.0% heat rate degradation, 10.0% increase in operating costs and 6.0% reduction in plant availability.
The rating remains underpinned by the strength of KPSB’s PPA with SESB, under which demand risk is fully assumed by the offtaker. SESB is an 80%-owned subsidiary of national power company Tenaga Nasional Berhad (AAA/Stable). The rating also incorporates the credit strength of its major shareholder PETRONAS Gas Berhad, and the mitigation of gas supply risk through KPSB’s long-term gas sales agreement with the state-owned entity Sabah Energy Corporation.
We note that KPSB’s credit metrics have continued to strengthen on the back of its consistent operational performance – in particular the company’s leverage position has improved to 0.7x as at end-2022. Should the operational and financial performance maintain their current trajectory, the outlook and/or rating could be revised upwards in our next review.