Friday, Oct 28, 2005
MARC has affirmed the AA+ID rating of Kapar Energy Ventures Sdn Bhd’s (KEV) RM3,402 million Bai Bithaman Ajil Islamic Debt Securities (BaIDS). The rating reflects the project’s stable and predictable cash flow supported by the contracted capacity payments as well as the credit strength of the off-taker cum majority shareholder, Tenaga Nasional Bhd (TNB). TNB carries an issuer rating of AA+ from MARC reflecting the utility’s near-monopolistic position in the transmission and distribution of electricity and majority government ownership.
KEV’s revenue is derived from the capacity and energy payments received from TNB. On average, capacity payment (CP) constitutes 48.6% of the total revenue, forming a stable stream of cashflow for KEV. Under the Power Purchase Agreement (PPA), CP is guaranteed if all the Generating Facilities (GF) maintain the average availability required and are sufficient to cover KEV’s fixed operating costs, principal and interest payments. Meanwhile, energy payment (EP) is dependent on the sale of electrical energy which hinges on the demand from TNB to dispatch from this plant. EPs are designed to cover fuel costs and variable costs associated with energy production.
Fuel supply risk is mitigated on the back of the long term supply agreements entered with TNB and its subsidiary, TNB Fuel Services Sdn Bhd (TFS). Fuel is the single largest cost component; however it is a pass-through cost to TNB.
Profitability and future cashflows are projected to be steady during the tenure of the BaIDS driven by the contracted CP and stable operating costs. To complement the financial discipline imposed in the semi-annual redemptions of the BaIDS, prompt payments from the offtaker, TNB, as demonstrated in the payment track record minimizes short-term liquidity problems.
The cash trap mechanism present in the payment waterfall and restriction on distribution serve to minimize cashflow leakages. The requirement and KEV’s ability to maintain a minimum amount equivalent to the next six months principal and profit payments (either in Finance Payment Account or Finance Service Reserve Account) at all times also provides a buffer to cover any shortfall in operating cashflows to meet the debt obligations.
Operationally, the plant’s performance during the first year of stabilisation period ended July 2005, was better than expected. This led to a favourable financial performance.
KEV’s revenue is derived from the capacity and energy payments received from TNB. On average, capacity payment (CP) constitutes 48.6% of the total revenue, forming a stable stream of cashflow for KEV. Under the Power Purchase Agreement (PPA), CP is guaranteed if all the Generating Facilities (GF) maintain the average availability required and are sufficient to cover KEV’s fixed operating costs, principal and interest payments. Meanwhile, energy payment (EP) is dependent on the sale of electrical energy which hinges on the demand from TNB to dispatch from this plant. EPs are designed to cover fuel costs and variable costs associated with energy production.
Fuel supply risk is mitigated on the back of the long term supply agreements entered with TNB and its subsidiary, TNB Fuel Services Sdn Bhd (TFS). Fuel is the single largest cost component; however it is a pass-through cost to TNB.
Profitability and future cashflows are projected to be steady during the tenure of the BaIDS driven by the contracted CP and stable operating costs. To complement the financial discipline imposed in the semi-annual redemptions of the BaIDS, prompt payments from the offtaker, TNB, as demonstrated in the payment track record minimizes short-term liquidity problems.
The cash trap mechanism present in the payment waterfall and restriction on distribution serve to minimize cashflow leakages. The requirement and KEV’s ability to maintain a minimum amount equivalent to the next six months principal and profit payments (either in Finance Payment Account or Finance Service Reserve Account) at all times also provides a buffer to cover any shortfall in operating cashflows to meet the debt obligations.
Operationally, the plant’s performance during the first year of stabilisation period ended July 2005, was better than expected. This led to a favourable financial performance.