Tuesday, Jan 15, 2002
The affirmation on the rating of AA ID (Double AA Islamic Debt)/MARC-1 ID for Puncak Niaga (M) Sdn Bhd’s ABBA serial bonds and MuCP/MTN programme reflects the monopolistic nature of the water industry, unfaltering demand fundamentals for treated water, continued favorable project risk allocations via its concession structure, satisfactory operating performance of its water treatment plants (WTP) and strengthening profitability and cash flow. Improvement in collections from Jabatan Bekalan Air Selangor (JBAS) has aided the improvement in PNSB’s cash flow. Nonetheless, stress test analysis shows the cash flow to be able to withstand delays in collections.
Industry fundamentals remain strong with consumption of water for Selangor and Kuala Lumpur increasing by 9.1% in FY2000. The overall production level in FY2000 continues to surpass the minimum take-or-pay quantity set by the state government as reflected in the higher production volume which exceeded total design capacity of the WTPs operated by PNSB. The overall utilization rate of 85.0% for the period of Jan-Sep 2001 is lower compared to 107.7% for the same period in 2000. MARC believes the lower utilization is attributed to lower demand for treated water by the commercial and industrial sectors stemming from lower economic activities and additional capacity with the commercial operation of SSP2 Stage II WTP on 1 January 2001. Nevertheless, the protection accorded by the concession agreements continues to shield the company from the effect of reduced demand for treated water, hence providing stability to PNSB’s cash flow.
Despite the slight deterioration of raw water quality at both the New and Existing Facilities against the bench-marks set by the Ministry of Health of Malaysia, the quality of the raw water was within the treating capability of PNSB. Quality of the treated water from the New Facilities was well within the standards set by the Ministry of Health while the quality of treated water from the Existing Facilities continues to improve.
Off-taker risk continues to be low given that the sole off-taker is the Selangor State Government. The proposed corporatisation of JBAS is not expected to substantially change this risk profile.
Unaudited results for 3Q 2001 saw revenue increased substantially by 56.9% to RM413.1 million on the back of additional revenue from the commercial operations of Stage II of SSP2 and the recognition of the scheduled step-up in the Bulk Supply Rate (BSR). Profitability continues to strengthen with operating profit before interest, tax, depreciation and amortization (OPBITDA) for the said period increasing by almost two-fold. Improvement in collections from JBAS during the review period resulted in improvement in cash flow coverage to 2.1x from 0.72x in FY2000. The recent issuance of the fixed-rate Junior Notes to the holding company reduces PNSB’s interest rate risk exposure. Sensitivity analysis suggest that the financial profile remains strong providing a debt service coverage of more than two and a half times under stressed situations.
Industry fundamentals remain strong with consumption of water for Selangor and Kuala Lumpur increasing by 9.1% in FY2000. The overall production level in FY2000 continues to surpass the minimum take-or-pay quantity set by the state government as reflected in the higher production volume which exceeded total design capacity of the WTPs operated by PNSB. The overall utilization rate of 85.0% for the period of Jan-Sep 2001 is lower compared to 107.7% for the same period in 2000. MARC believes the lower utilization is attributed to lower demand for treated water by the commercial and industrial sectors stemming from lower economic activities and additional capacity with the commercial operation of SSP2 Stage II WTP on 1 January 2001. Nevertheless, the protection accorded by the concession agreements continues to shield the company from the effect of reduced demand for treated water, hence providing stability to PNSB’s cash flow.
Despite the slight deterioration of raw water quality at both the New and Existing Facilities against the bench-marks set by the Ministry of Health of Malaysia, the quality of the raw water was within the treating capability of PNSB. Quality of the treated water from the New Facilities was well within the standards set by the Ministry of Health while the quality of treated water from the Existing Facilities continues to improve.
Off-taker risk continues to be low given that the sole off-taker is the Selangor State Government. The proposed corporatisation of JBAS is not expected to substantially change this risk profile.
Unaudited results for 3Q 2001 saw revenue increased substantially by 56.9% to RM413.1 million on the back of additional revenue from the commercial operations of Stage II of SSP2 and the recognition of the scheduled step-up in the Bulk Supply Rate (BSR). Profitability continues to strengthen with operating profit before interest, tax, depreciation and amortization (OPBITDA) for the said period increasing by almost two-fold. Improvement in collections from JBAS during the review period resulted in improvement in cash flow coverage to 2.1x from 0.72x in FY2000. The recent issuance of the fixed-rate Junior Notes to the holding company reduces PNSB’s interest rate risk exposure. Sensitivity analysis suggest that the financial profile remains strong providing a debt service coverage of more than two and a half times under stressed situations.