MARC Ratings has affirmed its ratings on Ranhill Powertron II Sdn Bhd’s (RPII) RM40.0 million outstanding Islamic Medium-Term Notes (IMTN) at AAIS and RM350.0 million outstanding guaranteed IMTN at AAAIS(fg). The ratings outlook is stable.
The AAIS rating incorporates the favourable terms under the power purchase agreement (PPA) which allocates 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 considers RPII’s cash balance of RM120.0 million as at end-March 2022, which is more than sufficient to meet the final non-guaranteed IMTN repayment of RM40.0 million due in June 2022. The AAAIS(fg) rating on the guaranteed IMTN reflects the unconditional and irrevocable Kafalah guarantee provided by Danajamin Nasional Berhad (Danajamin), on which MARC Ratings has a long-term counterparty credit rating of AAA/stable.
RPII owns and operates the 190MW combined-cycle gas turbine (CCGT) Rugading Power Station in Sabah under a 21-year PPA with SESB. The plant’s rolling unplanned outage rate (UOR) in 2021 was 1.77%, well within the unplanned outage limit (UOL) of 4.00%. RPII also achieved full fuel cost pass-through on meeting the heat rate requirement and recorded energy payments (EP) of RM104.9 million. RPII received capacity payments (CP) of RM95.5 million, 2.1% lower than the budgeted CP of RM97.5 million due to failure dispatch incidents.
Cash flow from operations (CFO) remained healthy at RM76.5 million as at end-2021. The CFO will decline from 2023 onwards due to a step-down in the capacity rate financial (CRF) from the current RM36.50 kW/month to RM23.80 kW/month. Any concerns on cash flow coverage following the step-down of the CRF will be mitigated by RPII’s liquidity position. Under the base case cash flow projections, cash balance would be sufficient to cover the shortfall in annual cash flow with the minimum and average pre-distribution financial service coverage ratios (FSCR) of 1.79x and 2.00x. Notwithstanding this, the interest of the sukukholders of the guaranteed IMTN is protected under the Kafalah guarantee from Danajamin.