CREDIT ANALYSIS REPORT

KIMANIS POWER SDN BHD - 2022

Report ID 605389004715 Popularity 107 views 28 downloads 
Report Date May 2022 Product  
Company / Issuer Kimanis Power Sdn Bhd Sector Infrastructure & Utilities - Power
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Rationale
Rating action     
MARC Ratings has affirmed its AAIS rating to Kimanis Power Sdn Bhd’s (KPSB) outstanding RM585.0 million Sukuk Programmes (sukuk). The rating outlook is stable.

Rationale     
The rating affirmation reflects KPSB’s steady cash flow generation attributed to the consistent performance of its plant to exceed the minimum requirements under the Power Purchase Agreement (PPA). Demand risk under the PPA is mitigated as KPSB is entitled to full capacity payment (CP) from offtaker, Sabah Electricity Sdn Bhd (SESB), an 83%-owned subsidiary of Tenaga Nasional Berhad (TNB) (AAA/Stable) on meeting performance metrics. 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 sale agreement that KPSB has with PETRONAS.

The operational metrics of KPSB’s plant remained strong in 2021. The plant registered a rolling unplanned outage rate (UOR) of 1.30% during the year, well within the PPA limit of 4.0%. As a result, KPSB received full CP of RM202.3 million. However, energy payment (EP) of RM120.8 million received was lower compared to RM130.1 million received in the previous year. This was due to lower electricity demand from SESB. The plant achieved full fuel cost pass-through as its monthly heat rates remained lower than the PPA-stipulated heat rates.

Cash flow from operations (CFO) remained strong at RM167.2 million during the year. Cash and cash equivalents stood at RM178.6 million as at end-March 2022, which is more than sufficient to meet the upcoming financial obligation of RM16.1 million in June 2022. Based on the cash flow projections, KPSB’s minimum and average pre-distribution finance service cover ratio (FSCR) would stand at 2.69x and 4.12x. Based on our sensitivity analysis, KPSB will be able to withstand moderate stress scenarios of heat rate degradation, increase in operating costs and reduction in plant availability.

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

Key strengths
Steady cash flow generation
Demand risk allocated to offtaker
Strong financial profile of project sponsors

Key risks
Plant performance risk




Rating trajectory

Upside scenario

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

Downside scenario

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

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