Sukuk ratings of Sarawak Energy subsidiaries reaffirmed

KUCHING: RAM Ratings has reaffirmed the AA2( s)/ Stable rating of Sarawak Power Generation Sdn Bhd’s (SPG) RM215 million Serial Sukuk Musharakah ( 2006/ 2021) in addition to the the enhanced rating of Mukah Power Generation Sdn Bhd’s ( MPG) RM665 million Senior Sukuk Mudharabah Programme (2006/2021) at AA2(s)/Stable.

The enhanced ratings reflect support for the companies from the larger Sarawak Energy Bhd ( SEB) which owns both companies via its wholly owned subsidiary SEB Power Sdn Bhd.

Touching on SPG, the ratings saw that Syarikat SESCO Bhd ( SESCO), a wholly owned subsidiary of SEB and SPG’s sole offtaker, had provided various forms of assistance to the Company in the past.

“Support was evident most recently in 2015 when SESCO allowed SPG to reset the rolling Equivalent Availability Factor (EAF) of Unit 8 of its plant to enable the Company to minimise reductions in capacity revenue under the terms of its Power Purchase Agreement ( PPA),” Ram said in a statement.

To note, SPG holds the licence to build, own and operate a 320 MW combined-cycle gas turbine facility in Tanjung Kidurong, Bintulu.

“Such assistance is further backed by a Letter of Support (LoS) extended by SESCO to SPG, dated Sept 24, 2007, in which the former undertakes to ensure that the Company fully and promptly meets all its financial obligations in respect of the Sukuk throughout the tenure of the facility.”

Meanwhile, on the MPG, RAM said SESCO, as MPG’s sole offtaker, has provided various forms of assistance to the company in the past to keep the company’s financial performance intact.

“The support provided from SEB and SESCO have been in the form of equity injection, revision in tariffs for a specified period of time via a Supplementary Agreement signed in 2014 and exclusion of major overhaul downtime in scheduled outages in the computation of the Plant’s equivalent availability factor for a specified period of time in 2016.

“Assistance is also evident in a Letter of Support (LoS) extended to MPG by SESCO, dated Aug 21, 2013, in which the latter undertakes to ensure that the Company fully and promptly meets all its financial obligations in respect of the Senior Sukuk throughout the tenure of the facility.”

Notably,MPG is an independent power producer incorporated to construct, own, operate and maintain a 270MW coal- fired power plant in Mukah under a 25-year PPA with SESCO, which expires on Jan 15, 2034.

“MPG exposure to demand risk remains minimal, given the terms of its Power Purchase Agreement with SESCO. The Company is entitled to full Capacity Payments, irrespective of the quantum of electricity generated, subject to meeting certain performance requirements.”