MARC has issued this update as part of its ongoing monitoring of Kimanis Power Sdn Bhd’s (KPSB) 285-megawatt combined-cycle gas fired power plant project in Kimanis Bay, Sabah. The sukuk currently has a rating of AA-IS with a stable outlook. The power plant’s third generating block (GB3) has failed to declare a commercial operation date (COD) after two rounds of reliability runs due to technical issues in contrast to the first and second generating blocks which had achieved their CODs on May 16 and July 22, 2014, respectively.

The GB3’s setback has led to a technical event of default (EOD) as the power plant was to achieve its COD within 180 days from April 1, 2014 as per the terms of the Power Purchase Agreement (PPA) between KPSB and the offtaker, Sabah Electricity Sdn Bhd. MARC understands that GB3 has commenced a third reliability run on October 23, 2014 and expected to achieve its COD in November 2014, which shall remain within the 90-day remedy period. Meanwhile, KPSB will seek bondholders’ approval to waive the EOD.

MARC is of the view that no rating action is warranted in relation to the aforementioned delay at this juncture. The rating agency believes that the parties are taking necessary action and are equipped to meet the COD within the remedy period. MARC will monitor the progress on GB3 and take appropriate rating action, if necessary.

Contacts:
Ng Suk Yee, +603-2082 2272/ sukyee@marc.com.my;
David Lee, +603-2082 2255/ david@marc.com.my.