MARC has affirmed its ratings on Ranhill Powertron II Sdn Bhd’s (RPII) RM190.0 million outstanding Islamic Medium-Term Notes (IMTN) and RM350.0 million outstanding guaranteed IMTN at AAIS and AAAIS(fg). The outlook on the ratings is stable.
The rating on the guaranteed IMTN reflects the unconditional and irrevocable Kafalah guarantee provided by financial guarantee insurer Danajamin Nasional Berhad (Danajamin) on which MARC has an insurer financial strength rating of AAA/stable and a long-term counterparty credit rating of AAA/stable. The rating on the IMTN reflects RPII’s sufficient projected cash flow coverages which are underpinned by the favourable terms of its power purchase agreement (PPA) with the offtaker Sabah Electricity Sdn Bhd (SESB), the sole electrical transmission system operator in Sabah, which is 83%-owned by Tenaga Nasional Berhad.
The stable outlook on the IMTN reflects MARC’s expectations that RPII will continue to demonstrate commendable operational performance and manage its financial metrics in line with its current rating. However, if the liquidity buffer were to decline such that the non-cash financial service coverage ratio (FSCR) is below 1.0x, the outlook would be revised to negative. Meanwhile, any changes in the rating and/or outlook of the guaranteed IMTN will be primarily driven by changes in Danajamin’s credit strength.
RPII owns and operates Rugading Power Station, a 190-megawatt (MW) combined-cycle gas turbine (CCGT) power plant in Sabah, under a 21-year PPA. The plant has continued to meet its availability target, heat rate and unscheduled outage rate as per PPA requirements. However, excess energy capacity in Sabah which has affected energy payments (EP) to RPII and the potential reliance on cash buffers from 2023 onwards when a step-down in the capacity rate financial (CRF) occurs remain key concerns.
RPII’s average availability target (AT) declined to 91.7% in 2017 (2016: 94.4%) due to a scheduled maintenance on the steam turbine in September 2017. The power plant’s average AT subsequently improved to 96.3% during 1H2018. RPII received actual capacity payments (CP) of RM96.9 million and RM48.1 million for 2017 and 1H2018, which were in line with the budget. However, EP was 6.6% lower-than-budget at RM86.4 million in 2017 due to a lower capacity factor of 56.7%. This improved to 61.8% in 1H2018 on a higher load dispatched from the grid, providing higher EP of RM42.4 million against the budgeted RM37.4 million.
For 2017, RPII’s operating profit before interest and taxes (OPBIT) stood higher at RM39.7 million attributable mainly to lower maintenance cost, which contributed to a turnaround to a profit of RM1.6 million. Cash flow from operations (CFO) improved to RM86.5 million (2016: RM52.9 million), leading to higher cash reserves at RM122.3 million. RPII’s finance service cover ratio (FSCR) stood at 2.56 times (x) while the facility debt-to-equity ratio was at 3.63x.
As at 1H2018, RPII’s profit before tax stood lower at RM0.9 million compared to RM2.1 million in 1H2017 attributed to a reversal of payables. The company’s cash reserves of RM79.6 million at end-1H2018 (1H2017: RM86.4 million) are sufficient to service its next profit payment and principal payment of RM50.0 million in 2019.
Under the latest base case cash flow projections, the minimum and average pre-distribution FSCR over the next five years are 2.08x and 2.22x. Based on MARC’s sensitivity analysis, RPII’s cash flow coverage is resilient against stressed events with a 50.0% load factor, among other assumptions, but could experience liquidity challenges between 2022 and 2028 upon CRF step-down beginning 2023. In this regard, MARC expects RPII to exercise discipline on dividend distributions to maintain sufficient liquidity buffer.
-Ends-
Contacts: Lim Chi Ching, +603-2717 2963/ chiching@marc.com.my; David Lee, +603-2717 2955/ david@marc.com.my .
[This announcement is available in MARC’s corporate homepage at http://www.marc.com.my ]
--- DISCLAIMER ---
This communication is provided by Malaysian Rating Corporation Berhad (MARC) on the basis of information believed by MARC to be accurate and reliable as derived from publicly available sources or provided by the rated entity or its agents. MARC, however, has not independently verified such information and makes no representation as to the accuracy or completeness of such information. Any assignment of a credit rating by MARC is solely to be construed as a statement of its opinion and not a statement of fact. A credit rating is not a recommendation to buy, sell, or hold any security.
© 2018 Malaysian Rating Corporation Berhad (364803-V)
© Press Release 2018Disclaimer: The contents of this press release was provided from an external third party provider. This website is not responsible for, and does not control, such external content. This content is provided on an “as is” and “as available” basis and has not been edited in any way. Neither this website nor our affiliates guarantee the accuracy of or endorse the views or opinions expressed in this press release.
The press release is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Neither this website nor our affiliates shall be liable for any errors or inaccuracies in the content, or for any actions taken by you in reliance thereon. You expressly agree that your use of the information within this article is at your sole risk.
To the fullest extent permitted by applicable law, this website, its parent company, its subsidiaries, its affiliates and the respective shareholders, directors, officers, employees, agents, advertisers, content providers and licensors will not be liable (jointly or severally) to you for any direct, indirect, consequential, special, incidental, punitive or exemplary damages, including without limitation, lost profits, lost savings and lost revenues, whether in negligence, tort, contract or any other theory of liability, even if the parties have been advised of the possibility or could have foreseen any such damages.
