RAM Ratings has reaffirmed the ratings of Tranche 1 and Tranche 2 of NUR Power Sdn Bhd's (NUR Power or the Group) RM650 million Guaranteed Sukuk Mudharabah (2012/2027) (the Sukuk) at AAA(bg)/Stable and AAA(fg)/Stable, respectively. The ratings reflect irrevocable and unconditional guarantees extended by Maybank Islamic Berhad and Danajamin Nasional Berhad, respectively, which enhance the credit standing of the Sukuk beyond NUR Power's credit strength.
NUR Power benefits from the mandate given to it by the Government of Malaysia to be the sole generator and distributor of power to tenants of Kulim Hi-Tech Park (KHTP or the Park) for a period of 35 years until 27 May 2033.
The Group has exhibited better operational performances for the past 2 years following the commencement of operations of both of its combined-cycle gas turbine blocks, as evidenced by the increased efficiency of its plant, fewer outages and an improved capacity factor. This, coupled with stronger electricity demand (+9.6%), a higher average electricity tariff (+15.5%) and reduced power purchase from Tenaga Nasional Berhad (TNB), had substantially improved NUR Power's financial profile in FY Dec 2014. The Group's operating profit before depreciation, interest and tax (OPBDIT) jumped almost 40% to RM220.56 million, broadening its OPDBIT margin to 42.86%. Additionally, a partial redemption of RM150.0 million of the Sukuk had improved the Group's gearing to 0.66 times and increased its funds from operations debt coverage ratio to 0.47 times as at end-December 2014.
Nonetheless, NUR Power remains exposed to sector-concentration risk as its performance is highly dependent on the electrical and electronic-products and solar-panel manufacturing industries. The Group also faces customer-concentration risk, with NUR Power's top 5 customers making up 75% of its electricity sales. First Solar (M) Sdn Bhd remains the Group's single largest customer, accounting for almost a third of the Park's electricity sales, with an uptake increase of 22.8% from the previous year.
NUR Power's lack of control over the determination of tariffs and the price of natural gas - its main cost item - exposes the Group to margin compression in the event of tariff revisions without corresponding increases in gas prices. Prolonged outages may necessitate power purchases from TNB at a higher price, which could put further pressure on its margin.
Media contact
Nurhayati Sulaiman
(603) 7628 1040
yati@ram.com.my
© Press Release 2015
