RAM Ratings has reaffirmed the AA3/Stable rating of Tanjung Bin Energy Issuer Berhad's (TBE Issuer or the Company) RM3.29 billion Sukuk Murabahah (the Sukuk). The rating reflects our view that TBE Issuer's strong debt-servicing ability will remain intact despite the current setback in the construction progress of the super-critical 1,000-MW coal-fired power plant in Tanjung Bin, Johor (the Plant or the Project).
"TBE Issuer's liquidity position remains satisfactory towards meeting its profit payment due in September 2016 even if there is a delay of up to 6 months," says Chong Van Nee, Co-Head of RAM's Infrastructure & Utilities Ratings. Concerns on the liquidity profile of the Company are anticipated to be alleviated by expected savings in financing and soft costs, net liquidated damages in relation to the engineering, procurement and construction (EPC) contract and the Power Purchase Agreement, as well as a standby line of credit to be procured by March 2016 to fund the Finance Service Reserve Account. Upon completion of the Plant, the Company is envisaged to have a strong finance service cover ratio on payment dates (with cash balances, post-distribution) of at least 1.49 times and an average of 1.60 times.
Subsequent to extensive measures to accelerate construction works, the Plant's construction had progressed and was 90.3% complete as at end-March 2015. The variance between actual and forecasted work progress had narrowed to 5.6% from 10.2% one year ago. TBE Issuer is working towards achieving the scheduled completion date of 1 March 2016. The Company believes this is achievable and any delays would not exceed a period of 2 months. Concerns of any cost overrun have been mitigated by a decision made between the EPC contractors and TBE Issuer to largely waive existing claims against the Company, addressing any lingering risk in relation to the possible materialisation of these claims.
TBE Issuer - a wholly-owned subsidiary of Tanjung Bin Energy Sdn Bhd (TBE) - is the turnkey contractor tasked with developing, constructing and financing the Plant for TBE. TBE, which is 100%-owned by Malakoff Corporation Berhad, has a power purchase agreement with Tenaga Nasional Berhad to develop, finance, construct and operate the Plant. TBE Issuer's financial commitments will be supported by back-to-back payments from TBE. In this regard, RAM recognises the strong credit link between these entities and views them in aggregate.
Media contact
Chin Wynn
(603) 7628 1170
chinwynn@ram.com.my
© Press Release 2015
