MARC Ratings has affirmed its ratings on Malakoff Power Berhad’s (MPower) outstanding RM1.44 billion Sukuk Murabahah at AA-IS and its RM1.2 billion Islamic Commercial Papers/ Islamic Medium-Term Notes (ICP/IMTN) Programmes (RM250.0 million IMTN currently outstanding) at MARC-1IS/AA-IS, with a stable outlook.
MPower, a wholly-owned subsidiary of Malakoff Corporation Berhad (Malakoff), provides operations and maintenance services to Malakoff-majority-owned independent power producers (IPPs). The ratings are based on Malakoff’s consolidated credit profile, reflecting strong integration, and Malakoff’s Kafalah guarantee of both facilities, which covers any liquidity shortfalls at MPower.
The ratings reflect predictable cash flows from Malakoff’s IPPs and its waste-management subsidiary Alam Flora Sdn Bhd, which adequately cover MPower’s debt service. These cash flows are underpinned by long-term power purchase agreements (PPAs) with Tenaga Nasional Berhad (AAA/Stable) and Alam Flora’s long-term waste-collection and public-cleansing concession in Pahang, Putrajaya and Kuala Lumpur, providing strong revenue visibility. The ratings also factor in expansion from newly secured projects, balanced against higher leverage as well as execution and plant performance risks.
Besides the 84MW RP Hydro plant in Kelantan, the group has secured several renewable energy projects — the 470MW LSS5+ in Perak (80:20 joint venture with Solarvest Holdings Berhad), the 100MW LSS Sarawak (via 70%-owned Malakoff Evergreen Sdn Bhd), and a 22.1MW waste-to-energy plant in Sg Udang, Melaka. These projects are at various stages of development and are likely to be funded through 80:20 non-recourse project finance. There are also potentially two gas-fired combined-cycle gas turbine power plants currently under review.
Group borrowings are expected to rise with expansion capex, lifting the gross debt-to-equity (DE) ratio to around 3.6x in 2029 (from 1.35x as at end-September 2025), while remaining within the 5.5x covenant. On a recourse basis, excluding project-level debt, the DE ratio is expected to peak at around 0.6x. Despite higher leverage, the projects are earnings-accretive, supported by Malakoff’s strong execution capabilities and proven track record in large-scale energy projects.
Malakoff’s power plants operated broadly in line with PPA requirements in 1H2025. 2H2025 performance is expected to be affected by the fire incident at Tanjung Bin Energy (TBE) in October 2025. MARC Ratings understands that TBE has sufficient liquidity, including cash and standby letters of credit, to meet its sukuk obligations over the next 12 months, with potential insurance recoveries offering additional upside.
Malakoff generated RM969.6 million of operating cash flow in 9M2025, supported by stable subsidiary performance. Rising capex over the next five years is expected to weigh on free cash flow. Cash balance totalled RM2.0 billion as at end-September 2025, including sufficient project-level balances earmarked for obligations.