Friday, Dec 15, 2023
MARC Ratings has affirmed its AA-IS rating on Tanjung Bin O&M Berhad’s outstanding RM165.0 million Sukuk Wakalah with a stable outlook.
The rating reflects the credit strength of Tanjung Bin O&M’s parent, Malakoff Power Berhad (MPower) (AA-IS /Stable), which has provided an unconditional and irrevocable undertaking to top up any shortfall in the finance service reserve account for the Sukuk Wakalah, as well as the operational and financial linkages between the issuer and its parent. On this basis, MARC Ratings has applied a full credit substitution approach to Tanjung Bin O&M’s credit risk assessment with MPower’s senior credit. Wholly-owned by Malakoff Corporation Berhad, MPower undertakes the operations and maintenance (O&M) for its parent’s majority-owned domestic independent power producers.
Tanjung Bin O&M provides O&M services for the 2,100MW power plant owned by sister company, Tanjung Bin Power Sdn Bhd (TBP) under an O&M agreement (OMA). Tanjung Bin O&M engaged MPower to undertake part of the services under a subcontract (sub-OMA); both the OMA and sub-OMA are coterminous with the 25-year power purchase agreement between TBP and Tenaga Nasional Berhad (TNB).
Tanjung Bin O&M’s revenue is mostly derived from fixed and variable operating fees; the latter is based on the TBP plant’s net electricity output. In 1H2023, revenue fell 9.1% to RM137.4 million as electricity output declined 20.6% on higher planned outages for major maintenance works as well as lower electricity dispatch by single buyer TNB in 1Q2023; this was due to the elevated coal prices during the period that had pushed up energy costs at coal-fired power plants like TBP. Cash flow from operations was correspondingly negative.
A significant planned outage in 2024 may also affect Tanjung Bin O&M’s performance next year. However, the company’s debt maturities and amortisation are manageable, with no debt due in 2024 and 2025, which should support liquidity.
Contacts:
Ahmad Kamal Syauki, +603-2717 2958/ kamal@marc.com.my
Siti Nursyahira, +603-2717 2956/ nursyahira@marc.com.my
Sharidan Salleh, +603-2717 2954/ sharidan@marc.com.my