Jul 24 2012
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RAM Ratings assigns preliminary AA2 rating to Tanjung Bin Power's proposed Sukuk Ijarah
Proceeds from the Sukuk Ijarah will mainly be utilised to refinance the outstanding RM3.53 billion under the Company's existing RM5.57 billion Istisna' Medium-Term Notes Programme (2003/2018) and for working capital purposes, and/or to provide payment/advance to its shareholder(s).
The preliminary rating reflects Tanjung Bin Power's robust debt-coverage levels; its minimum finance service coverage ratio ("FSCR") (with cash balances, post-distribution and calculated on principal repayment dates) is expected to come up to 1.66 times, which commensurates with an AA2 rating. Notably, the Company's cash buffers are supported by the stringent covenanted post-distribution FSCR (with cash balances) of 1.65 times. In arriving at our projections, we have assumed that the Company will adhere to its financial covenants throughout the tenure of the proposed Sukuk Ijarah on a forward-looking basis.
The preliminary rating is also supported by Tanjung Bin Power's strong business profile, underscored by the favourable terms of its PPA with TNB. We derive further comfort from the sturdy credit profile of TNB, whose debt facility carries an AAA rating, with a stable outlook.
Meanwhile, the Plant has been increasingly experiencing operational hiccups since 2010. In fiscal 2011, its total unscheduled outage hours resulted in an unscheduled outage rate ("UOR") that exceeded the PPA limit of 6%, resulting in availability capacity payments ("ACPs") losses; in any case, the ACPs losses have been fully recovered though reimbursement from TNB for unutilised scheduled outage hours. We note that the Plant's UOR had eased below 6% as at end-February 2012. In any case, our sensitised cashflow analysis assumes ACP losses due to operational hiccups throughout the tenure of the Sukuk Ijarah.
In the meantime, and similar to all other IPPs, Tanjung Bin Power remains exposed to regulatory and single-project risks.
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