CREDIT ANALYSIS REPORT

RANHILL POWERTRON II SDN BHD - 2022

Report ID 605389004713 Popularity 93 views 15 downloads 
Report Date May 2022 Product  
Company / Issuer Ranhill Powertron II Sdn Bhd Sector Infrastructure & Utilities - Power
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Rationale
Rating action        

MARC Ratings has affirmed its ratings on Ranhill Powertron II Sdn Bhd’s (RPII) RM40.0 million outstanding Islamic Medium-Term Notes (IMTN) at AAIS and its RM350.0 million outstanding guaranteed IMTN at AAAIS(fg).The outlook on the ratings is stable

Rationale

The AAIS  rating reflects the favourable terms under the power purchase agreement (PPA) which allocates demand risk and fuel price risk to the offtaker, Sabah Electricity Sdn Bhd (SESB), an 83%-owned subsidiary of Tenaga Nasional Berhad (TNB). The rating also considers RPII’s current cash balance of RM120.0 million as at end-March 2022, which is more than sufficient to meet the final non-guaranteed IMTN repayment of RM40.0 million in June 2022. The AAAIS(fg) rating on the guaranteed IMTN reflects the unconditional and irrevocable Kafalah guarantee provided by Danajamin Nasional Berhad (Danajamin), on which MARC Ratings has a long-term counterparty credit rating of AAA/stable. 
   
RPII owns and operates the 190MW combined-cycle gas turbine (CCGT) Rugading Power Station in Sabah under a 21-year PPA with SESB. The plant’s rolling unplanned outage rate (UOR) in 2021 was 1.77%, well within the unplanned outage limit (UOL) of 4.00%. RPII also achieved full fuel cost pass-through on meeting the heat rate requirement and recorded energy payment (EP) of RM104.9 million. RPII received capacity payments (CP) of RM95.5 million, 2.1% lower than the budgeted CP of RM97.5 million due to failure dispatch incidents. 

Cash flow from operations (CFO) remained healthy at RM76.5 million in 2021. The CFO will decline from 2023 onwards due to a step-down in the capacity rate financial (CRF) from the current RM36.50 kW/month to RM23.80 kW/month. Any concerns on cash flow coverage following the step-down of the CRF will be mitigated by RPII’s liquidity position. Under the base case cash flow projections, cash balance would be sufficient to cover the shortfall in annual cash flow with the minimum and average pre-distribution FSCRs of 1.79x and 2.00x. Notwithstanding this, the interest of the sukukholders of the guaranteed IMTN is protected under the Kafalah guarantee from Danajamin. 

Rating Outlook

The stable outlook on the guaranteed notes reflects the outlook of Danajamin’s rating. 

Rating Trajectory 

Downside scenario

The rating on the guaranteed notes will be lowered in the event of a downgrade in Danajamin’s rating. 

Key strengths
  • Demand risk and fuel price risk allocated to offtaker
  • Satisfactory cash flow generation from power plant operation
  • Healthy financial service cover ratio

Key risks
  • Step-down in the capacity rate financial from 2023 onwards would affect liquidity buffer

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