MARC Ratings has affirmed its AAAIS rating on TTM Sukuk Berhad’s (TTM SPV) RM600.0 million Sukuk Murabahah with a stable outlook. TTM SPV is the funding vehicle of Trans Thai-Malaysia (Thailand) Limited (TTMT) for the construction of two gas pipelines to transport natural gas from the Malaysia-Thailand Joint Development Area (JDA) in the Gulf of Thailand to the industrial city of Rayong in Thailand (TTM Phase II). TTM SPV is wholly owned by TTMT, a 50:50 joint venture between Petroliam Nasional Berhad (PETRONAS) and PTT Public Company Ltd (PTT), the national oil companies of Malaysia and Thailand.
The rating continues to reflect MARC Ratings’ assessment of a very high likelihood of support for Trans Thailand-Malaysia (TTM), a strategically important project involving two governments through project sponsors, PETRONAS and PTT. The rating also considers the credit linkages in the form of cross-acceleration and cross-default provisions between the rated sukuk and the term loan taken to finance the first phase of the TTM project (TTM Phase I). In addition, the rating agency views that PETRONAS would have a strong strategic and reputational incentive to provide ringgit liquidity in the event of any transfer and convertibility issues arising from any foreign exchange restrictions imposed by the Thai government. PETRONAS has a senior unsecured rating of AAA/Stable from MARC Ratings, based on publicly available information.
TTMT’s credit profile is supported by its stable and predictable cash flow, underpinned by its long-term service agreements with PTT and PETRONAS, and its cost-plus tariff structure that ensures a relatively stable profit margin. Its unit capacity reservation charge (UCRC) — used to derive its capacity reservation charges/revenue — is designed to cover its operating costs and finance service obligations, while providing adequate shareholders’ return.
TTM Phase II posted revenue of US$8.8 million as at 1H2023, up slightly by 2.3% y-o-y on higher UCRC (Jan-May 2023: US$142.34/mmscf; Jan-May 2022: US$141.49/mmscf) and a 6.3% rise in gas sales volume to 106,890 million standard cubic feet (mmscf). In 2022, revenue grew 9% y-o-y to US$18.6 million, with the annual financial service coverage ratio standing at 1.19x as at end-2022 and remaining above the covenanted 1.10x. The rating agency expects TTM Phase II’s operating performance to be stable on the back of steady gas demand, which should enable it to maintain relatively consistent key credit metrics throughout the sukuk tenure. MARC Ratings also draws comfort from the UCRC pricing mechanism that is constructed to cover debt service and operating costs, while providing adequate shareholders’ return.
At TTMT’s level, 1H2023 revenue and gas sales volume were generally stable at US$50.4 million and 202,384 mmscf (1H2022: 201,965 mmscf). Its debt-to-equity (DE) ratio improved to 0.4x as at end-June 2023 (end-2022: 0.5x) as borrowings reduced to US$95.9 million. At 0.4x, the DE ratio remained well within the covenanted 2.33x.