Musteq Hydro’s sukuk rating reinforced by bank guarantee

KUALA LUMPUR: RAM Rating Services Bhd (RAM Ratings) has re affirmed the enhanced AAA(bg )/ Stable rating of hydro power plant operator Musteq Hydro Sdn Bhd’s RM80 million bank-guaranteed sukuk musharakah (2012/2022).

In a statement yesterday, it said the rating reflected an unconditional and irrevocable bank guarantee provided by Maybank Islamic Bhd (rated AAA/Stable/P1 by RAM), which enhanced the credit profile of the sukuk beyond Musteq’s stand-alone credit strength.

“Musteq is an independent power producer that owns and operates a 20-MW hydro power plant in Sungai Kenerong, Kelantan, under a power purchase agreement with Tenaga Nasional Bhd that will expire on Dec 19, 2030.

“Musteq’s cashflow-generating and debt-servicing capabilities remain fragile despite the plant having partially recommenced operations since July 2017,” the rating firm said, adding that the plant had been forced to halt operations on several occasions since 2015 due to heavy flooding.

The latest flooding occurred in the first half of 2017, and the units that were functional had continued to face many operational challenges.

“The debilitating frequency and length of the plant’s breakdowns had negatively impacted the company’s electricity production and in turn its cashflow generation.

“We expect Musteq to face another cash shortfall on Jan 26, 2019, when its next principal payment of RM10.9 million becomes due, if the plant is unable to operate at full capacity,” it added. — Bernama