MARC keeps ‘AAAIS’ rating on TNB Western’s sukuk
KUALA LUMPUR: Malaysian Rating Corp Bhd (MARC) has affirmed its “AAAIS” rating on TNB Western Energy Bhd’s sukuk of up to RM4 billion with a “stable” outlook.
TNB Western Energy is the funding vehicle of parent TNB Manjung Five Sdn Bhd, a unit of Tenaga Nasional Bhd.
In a statement yesterday, MARC said the rating and outlook were equalised with TNB’s corporate credit rating of “AAA/stable” on the basis of the rolling guarantee and commitment from the national utility company.
TNB has undertaken to maintain full ownership of TNB Western Energy through TNB Manjung Five, which has operational proximity to the project sponsor and offtaker TNB.
TNB Manjung Five was awarded a 25-year power purchase agreement (PPA) by TNB on August 16, 2013 to design, construct, own, operate and manage a 1,000MW ultra-supercritical coal-fired power plant.
The power plant was built on a reclaimed island in Manjung, Perak, and it started operations on September 28, 2017.
TNB Manjung Five contracted TNB Repair and Maintenance Sdn Bhd (TNB Remaco) to operate and maintain the power plant under a 25-year operation and maintenance agreement.
MARC views the operations and maintenance (O&M) provider as experienced and competent.
TNB Manjung Five had received capacity revenue of RM78 million in 2017 and RM148.6 million in the first half of last year, which were in line with the budget as the plant registered an unplanned outage rate below the PPA-specified unplanned outage limit.
However, the plant did not manage a full fuel cost passthrough as the heat rates were higher than the PPA requirements. This led to 10.9 per cent lower receipts in energy payments from the budgeted amount in 2017.
“TNB Remaco has taken remedial measures to address these issues, resulting in an improved heat rate performance in the first half of last year.
“We will continue to monitor the heat rate performance to evaluate the impact that energy payment losses will have on TNB Manjung Five’s financial profile,” said MARC.
Under the latest base case projections, the project is forecast to have minimum and average predistribution finance service cover ratios with cash of 0.76 times and 1.21 times during the sukuk tenure.