MARC Ratings has affirmed its AA-IS rating on Jimah East Power Sdn Bhd’s (JEP) outstanding RM7.97 billion Sukuk Murabahah with a stable outlook.
The affirmed rating is underpinned by JEP’s stable cash flow from its 2×1,000MW ultra-supercritical coal plant, backed by a 25-year power purchase agreement (PPA) with indirect 70% shareholder Tenaga Nasional Berhad (TNB, AAA/Stable). The rating reflects JEP’s operational and financial linkages with TNB, and the credit strength of project sponsors, namely TNB, Mitsui & Co., Ltd (Mitsui) (15.0%), and The Chugoku Electric Power Co., Inc (Chugoku) (15.0%). The rating is moderated by plant operation issues affecting JEP’s ability to receive full capacity payments (CP) and energy payments (EP).
Unit 1 faced recurring high-pressure (HP) heater tube leaks in October 2023 and February 2024. Temporary repairs conducted during the February 2024 outage, along with other unplanned events, drove the unit’s unplanned outage rate (UOR) above the PPA thresholds of 6% and 8% in 2024, leading to CP of RM1,056.4 million — 2.0% below budget. Full repairs, including HP tube replacements, were completed during the major overhaul in May 2025, reducing the UOR to 4.26% as of 19 June 2025, now within PPA limits. A RM12.6 million insurance claim for the February 2024 incident is under review, and a RM30.0 million rectification claim against the engineering, procurement, and construction contractor remains under negotiation. As of the same date, Unit 2’s UOR was 1.69%, well within PPA limits.
EP declined to RM3,115.0 million in 2024 (2023: RM3,314.5 million), primarily due to lower applicable coal prices and a higher heat rate loss of RM81.4 million (2023: – RM47.1 million). As in previous years, JEP was unable to fully pass through fuel costs, as the plant’s heat rate exceeded the PPA threshold, partly due to the HP heater tube leaks. According to JEP, Unit 1 has met the PPA heat rate requirement since resuming operations on 23 June 2025, while Unit 2 is expected to improve after its next major overhaul, scheduled from 1 May 2026 to 4 July 2026.
JEP reported pre-tax loss of RM72.4 million in 2024, mainly due to heat rate loss. Operating cash flow declined 7.6% y-o-y to RM698.2 million, primarily due to increased purchases of spare parts for major maintenance work in 2025 and 2026. Liquidity is expected to remain constrained over this period, with JEP drawing RM100 million in working capital during 2Q2025 and planning an additional RM100 million drawdown in 4Q2025. Repayment is planned in 2027 when no major overhaul is scheduled. As of end-June 2025, JEP held RM196.4 million in cash. An upcoming RM413.6 million debt service obligation on 4 December 2025 is expected to be covered through existing cash reserves and near-term cash inflows.
Base case pre-distribution finance service coverage ratio (FSCR) (including cash) is projected at 1.25x (minimum) and 1.66x (average), with sensitivity showing FSCR remaining above 1.00x under scenarios of moderate underperformance.