JIMAH EAST POWER SDN BHD - 2020 |
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| Report ID | 605402 | Popularity | 1223 views 145 downloads | |||||
| Report Date | Feb 2021 | Product | ||||||
| Company / Issuer | Jimah East Power Sdn Bhd (JEP) | Sector | Infrastructure & Utilities - Power | |||||
| Price (RM) |
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| Rationale |
Rating action MARC has affirmed its AA-IS rating on Jimah East Power Sdn Bhd’s (JEP) outstanding RM8.98 billion Sukuk Murabahah with a stable outlook. Rationale JEP owns and operates a 2,000-megawatt (MW) ultra-supercritical coal-fired power plant in Jimah, Negeri Sembilan under a 25-year power purchase agreement (PPA) with Tenaga Nasional Berhad (TNB). The power plant achieved commercial operation date (COD) on August 22, 2019 (Unit 1) and December 27, 2019 (Unit 2). The affirmed rating incorporates predictable cash flows from the power plant, the operational and financial linkages with TNB which has an indirect 70%-stake in JEP, and the credit strength of project sponsors, namely TNB (70.0%), Mitsui & Co., Ltd (Mitsui) (15.0%) and The Chugoku Electric Power Co., Inc (Chugoku) (15.0%). The rating is moderated by risks associated with the plant’s performance. In 1H2020, JEP received total capacity payments (CP) of RM523.3 million, 1.8% below the budgeted amount of RM532.6 million. CPs received were lower than budgeted due to Unit 1’s unplanned outage rate (UOR) exceeding the unplanned outage limit (UOL) of 6% in May 2020, standing at 7.90% as at end-1H2020. The UOR has since improved following repair and maintenance works, standing at 5.73% as at end-December 2020. On the other hand, Unit 2’s UOR of 0.62% as at end-1H2020 remains well within the UOL. All costs incurred during the unplanned outages are covered by the post-construction warranty provided by the engineering, procurement and construction (EPC) consortium for 24 months from the COD of the relevant unit, save for the costs of outages the operator is responsible for. JEP managed to pass-through its fuel costs for unit 1 as the heat rates remained well within PPA requirements. On the other hand, energy payment (EP) reductions were incurred for Unit 2 as its heat rate marginally exceeded PPA requirements in April, May and June 2020 by an average of 0.16%. Better coal management has returned the heat rate back within PPA requirements in 3Q2020. In 1H2020, cash flow from operations (CFO) stood at RM560.3 million, with moderate CFO interest coverage of 2.04x. Its designated account balances of RM911.3 million as at end-December 2020 provides sufficient coverage to meet its next sukuk profit payment and first principal repayment amounting to RM324.3 million on June 4, 2021. Under base case projections, JEP’s finance service ability remains adequate with minimum and average finance service cover ratios (FSCR) with cash standing at 1.57x and 1.79x. JEP’s projected revenue in the form of CPs and EPs provides a tight cash flow coverage with minimum and average FSCR without cash of 1.09x and 1.22x. Any cash flow shortfall that could arise from operational issues is mitigated by the project’s liquidity. Rating outlook The stable outlook reflects MARC’s expectations that the power plant’s operational performance will remain within projections, any operational issues encountered will be adequately addressed and that JEP maintains sufficient liquidity buffers. Major Rating Factors Key strengths
Key risks
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