Wednesday, Apr 19, 2023
MARC Ratings has affirmed its AAIS rating on Kimanis Power Sdn Bhd’s (KPSB) outstanding RM485.0 million Sukuk Programme. The outlook on the rating is stable.
KPSB’s 285MW combined-cycle gas plant has continued to perform in line with our expectations, meeting all stipulated requirements under its 21-year power purchase agreement (PPA) with offtaker, Sabah Electricity Sdn Bhd (SESB). In 2022, the plant registered a rolling unplanned outage rate of 1.93% during the year, well within the PPA limit of 4.0%. As a result, it received full capacity payments of RM203.0 million. Heat rates also remained lower than the PPA-stipulated heat rates, allowing KPSB to fully pass through its fuel costs. Higher energy payments of RM148.5 million were received on the back of higher output during the year (2021: RM120.8 million).
KPSB’s steady operational performance translated to continued strong cash flow generation, with cash flow from operations of RM224.3 million (2021: RM197.7 million). Cash and bank balances remained healthy at RM171.2 million as at end-December 2022, against total sukuk obligations of RM110.3 million in 2023. Based on the cash flow projections, KPSB’s minimum and average pre-distribution finance service cover ratios would stand at 2.57x and 4.09x. Our sensitivity analysis demonstrates that KPSB would be able to withstand moderate stress scenarios, including a combined scenario of 2.0% heat rate degradation, 10.0% increase in operating costs and 6.0% reduction in plant availability.
The rating remains underpinned by the strength of KPSB’s PPA with SESB, under which demand risk is fully assumed by the offtaker. SESB is an 80%-owned subsidiary of national power company Tenaga Nasional Berhad (AAA/Stable). The rating also incorporates the credit strength of its major shareholder PETRONAS Gas Berhad, and the mitigation of gas supply risk through KPSB’s long-term gas sales agreement with the state-owned entity Sabah Energy Corporation.
We note that KPSB’s credit metrics have continued to strengthen on the back of its consistent operational performance – in particular the company’s leverage position has improved to 0.7x as at end-2022. Should the operational and financial performance maintain their current trajectory, the outlook and/or rating could be revised upwards in our next review.
Contacts:
Neo Xue Wei, +603-2717 2937/ xuewei@marc.com.my
Siti Nursyahira Mat Rozi, +603-2717 2956/ nursyahira@marc.com.my
Sharidan Salleh, +603-2717 2954/ sharidan@marc.com.my