MARC Ratings has affirmed its AAAIS(bg) rating on Ranhill Sabah Energy II Sdn Bhd’s (RSEII) (formerly known as Ranhill Powertron II Sdn Bhd) outstanding RM300.0 million Islamic Medium-Term Notes (IMTN) Programme with a stable outlook. The rating affirmation reflects the unconditional and irrevocable guarantee on the programme from Bank Pembangunan Malaysia Berhad, which carries a financial institution rating of AAA/Stable from MARC Ratings.
RSEII owns and operates the 190MW combined-cycle gas turbine Rugading Power Station in Sabah under a 21-year power purchase agreement (PPA) with Sabah Electricity Sdn Bhd (SESB), a subsidiary of Tenaga Nasional Berhad. The plant continued to perform well in 2023, maintaining its unplanned outages below the limit of 4%, as stipulated in the PPA, allowing it to receive full capacity payments of RM77.7 million for the year. Heat rate performance was also better than the PPA requirement, enabling full cost pass-through to SESB, with the plant receiving energy payments of RM114.3 million in 2023.
Cash flow from operations (CFO) was, however, lower at RM53.6 million (2022: RM75.9 million) due to higher operating costs related to scheduled major maintenance works. RSEII has a healthy liquidity position as at end-April 2024 that includes cash totalling RM109.8 million, which is sufficient to meet its upcoming debt service obligations of RM58.2 million due in June 2024. Cash flows and liquidity are expected to be sufficient to meet future sukuk obligations, with projected minimum and average finance service cover ratio of 1.58x and 1.73x over the 2024-2029 period. The rating agency expects RSEII to remain prudent to preserve liquidity during periods of potentially lower CFO generation.