Rating action          

MARC Ratings has affirmed its AA_IS rating on Kimanis Power Sdn Bhd’s (KPSB) outstanding RM485.0 million Sukuk Programme with a stable outlook. 

KPSB’s 285MW combined-cycle gas plant has continued to perform in line with our expectations, meeting all stipulated requirements under its 21-year power purchase agreement (PPA) with offtaker, Sabah Electricity Sdn Bhd (SESB). In 2022, the plant registered a rolling unplanned outage rate (UOR) of 1.93% during the year, well within the PPA limit of 4.0%. Heat rates also remained lower than the PPA-stipulated heat rates, allowing KPSB to fully pass through its fuel costs. Higher energy payments (EP) of RM148.5 million were received on the back of higher electricity output during the year (2021: RM120.8 million). 

KPSB’s steady operational performance translated to continued strong cash flow generation; cash flow from operations (CFO) was recorded at RM224.3 million during the year. Cash and bank balances of RM171.2 million as at end-December 2022 are more than sufficient to meet its total sukuk obligations of RM110.3 million in 2023. Based on the cash flow projections, KPSB’s minimum and average pre-distribution finance service cover ratios (FSCR) would stand at 2.57x and 4.09x. Based on our sensitivity analysis, KPSB would be able to withstand moderate stress scenarios, including a combined scenario of 2.0% heat rate degradation, 10.0% increase in operating costs and 6.0% reduction in plant availability.

The rating remains underpinned by the strength of KPSB’s PPA with SESB, under which demand risk is fully assumed by the offtaker. SESB is an 80%-owned subsidiary of national power company Tenaga Nasional Berhad (TNB) (AAA/Stable). The rating also incorporates the credit strength of PETRONAS Gas Berhad (PGB), a major shareholder in KPSB, and the mitigation of gas supply risk through a long-term gas sales agreement that KPSB has with state-owned entity Sabah Energy Corporation. 

The stable outlook incorporates our view that KPSB’s plant and financial performance will remain in line with projections in the near term. 

An upgrade to the next rating band may be considered if KPSB’s borrowings are pared down substantially (gross debt-to-equity (DE) ratio of below 0.5x) with a stronger liquidity position.

Downward pressure on the rating could occur in the event of an unexpected weakness in plant performance that would significantly impact KPSB’s cash flow generation.