Monday, Sep 27, 2021
MARC has affirmed its AAAIS rating on TNB Western Energy Berhad’s (TNB Western) outstanding sukuk of RM3.7 billion with a stable outlook.
TNB Western’s rating is equalised to parent Tenaga Nasional Berhad’s (TNB) corporate credit rating of AAA/stable, based primarily on the strength of TNB’s unconditional and irrevocable rolling guarantee to fund shortfalls in the finance service account, and the parent’s undertaking to maintain full ownership in TNB Western through its 100%-owned TNB Manjung Five Sdn Bhd. TNB Western is the funding vehicle for TNB Manjung Five for the construction of a 1,000MW ultra-supercritical coal-fired power plant in Manjung, Perak.
We note that the plant has faced recurring operational issues, which had resulted in a substantially higher unplanned outage rate (UOR) of 39% as at end-2020 compared to the PPA-prescribed unplanned outage limit of 6%. As a consequence, TNB Manjung Five received lower-than-budgeted capacity payments of RM154.4 million while energy payments fell to RM522.6 million. Pre-tax losses stood at RM134.6 million. Based on cash flow projections, its projected three-year average forward-looking finance service cover ratio (FSCR) would stand at 1.98x with minimum FSCR of 1.24x in 2023. Our sensitivity analysis shows that TNB Manjung Five would be able to withstand a mild stress scenario of 5% reduction in capacity payments p.a before the minimum FSCR falls below 1.00x.
TNB Western’s rating is equalised to parent Tenaga Nasional Berhad’s (TNB) corporate credit rating of AAA/stable, based primarily on the strength of TNB’s unconditional and irrevocable rolling guarantee to fund shortfalls in the finance service account, and the parent’s undertaking to maintain full ownership in TNB Western through its 100%-owned TNB Manjung Five Sdn Bhd. TNB Western is the funding vehicle for TNB Manjung Five for the construction of a 1,000MW ultra-supercritical coal-fired power plant in Manjung, Perak.
We note that the plant has faced recurring operational issues, which had resulted in a substantially higher unplanned outage rate (UOR) of 39% as at end-2020 compared to the PPA-prescribed unplanned outage limit of 6%. As a consequence, TNB Manjung Five received lower-than-budgeted capacity payments of RM154.4 million while energy payments fell to RM522.6 million. Pre-tax losses stood at RM134.6 million. Based on cash flow projections, its projected three-year average forward-looking finance service cover ratio (FSCR) would stand at 1.98x with minimum FSCR of 1.24x in 2023. Our sensitivity analysis shows that TNB Manjung Five would be able to withstand a mild stress scenario of 5% reduction in capacity payments p.a before the minimum FSCR falls below 1.00x.
We expect the plant’s overall performance to improve over the near term as TNB Manjung Five addresses the operational issues through the upgrade of the fan blades in February 2021 and completes the rectification work at its air heater by October 2021.
Contacts:
Contacts:
Neo Xue Wei, +603-2717 2937/ xuewei@marc.com.my;
Lee Chi Han, +603-2717 2939/ chihan@marc.com.my;
Sharidan Salleh, +603-2717 2954/ sharidan@marc.com.my.