Monday, Nov 07, 2022
MARC Ratings has affirmed its AA-IS rating on Tanjung Bin O&M Berhad's outstanding RM180 million Sukuk Wakalah with a stable outlook.
The rating affirmation reflects the credit strength of Tanjung Bin O&M's parent, Malakoff Power Berhad (MPower) (AA-/stable), which has provided an unconditional and irrevocable undertaking to top up any shortfall in the finance service reserve account (FSRA) for the Sukuk Wakalah. On this basis as well as the operational and financial linkages between the issuer and its parent, MARC Ratings has applied a full credit substitution approach to Tanjung Bin O&M’s credit risk assessment with MPower’s senior credit rating.
Tanjung Bin O&M provides operations and maintenance (O&M) services for a 2,100MW power plant owned by its sister company, Tanjung Bin Power Sdn Bhd (TBP) under an O&M agreement (OMA). It had partially transferred the operations to MPower under a subcontract of the OMA (sub-OMA); both the OMA and sub-OMA are coterminous with the 25-year power purchase agreement between TBP and Tenaga Nasional Berhad.
Tanjung Bin O&M mainly derives its revenue from fixed and variable operating fees; the latter is based on the TBP plant’s net electricity output. In 1H2022, revenue was lower by 5.0% y-o-y to RM151.2 million following a 7.4% y-o-y decline in electricity output due to higher planned outage for major maintenance works of 98 days (1H2021: 68 days). Coupled with higher operating cost for the plant’s maintenance works, Tanjung Bin O&M registered pre-tax loss of RM64.8 million. The company expects the loss to be lower for full year 2022 as no major maintenance is scheduled for 2H2022.
Tanjung Bin O&M’s operating performances in 2023 and 2024 is expected to be impacted by a higher number of days for major maintenance and inspection works. Any liquidity risk is mitigated by Tanjung Bin O&M’s cash balances of RM114.7 million as at end-September 2022. In addition, a lower sukuk repayment of RM15.0 million in July 2023 and no repayment scheduled for 2024 and 2025 will ease its financial burden.
Contacts:
Siti Nursyahira, +603-2717 2956/ nursyahira@marc.com.my
Neo Xue Wei, +603-2717 2937/ xuewei@marc.com.my
Sharidan Salleh, +603-2717 2954/ sharidan@marc.com.my