RAM Ratings reaffirms Edra Energy’s AA3/stable sukuk rating
KUALA LUMPUR: RAM Rating Services Sdn Bhd (RAM Ratings) has reaffirmed the AA3/ Stable rating of Edra Energy Sdn Bhd’s Sukuk Wakalah of up to RM5.085 billion in nominal value.
The rating agency said the rating reflected Edra Energy’s strong project economics that was underscored by its stable cash flow and a minimum finance service coverage ratio.
“A minimum finance service coverage ratio of 1.52 times under RAM Ratings’ sensitised case throughout the tenure of the sukuk commensurate with an AA3 rating,” it said.
Meanwhile, RAM Rating said the construction of Edra Energy’s 2,242-megawatt combined- cycle gas-turbine (CCGT) power plant in Alor Gajah, Melaka, the largest gas power plant in Malaysia, has also progressed ahead of the schedule.
The plant, utilising General Electric Company’s ( GE) latest gas turbine, has a moderate technology risk due to a long-term service agreement ( LTSA) of 12 years with GE for the operation and maintenance of the gas turbine.
The rating agency said GE has also provided support in respect of the insurability of the plant, along with a special warranty to cover collateral damages.
“GE’s willingness and confidence in providing support, along with its more than fivedecade-long operating track record, are also positive factors.
“Our sensitivity analysis assumes operational hiccups upon achieving commercial operations and at the end of each three-year contract year block, as well as heftier operation and maintenance costs after the expiry of the LTSA. Despite this, Edra Energy’s debtservicing ability remains intact,” it said.
RAM Ratings said the construction risk was also moderated by the lumpsum turnkey engineering, procurement and construction ( EPC) contract with Hyundai Engineering Co Ltd, Hyundai Engineering and Construction Co Ltd and Hyundai Engineering Malaysia Sdn Bhd, which provide performance guarantees, an extended defects liability period of three years and liquidated damages for delays.
“The EPC contractors’ experience and long- standing track records also alleviate construction risk.
“Furthermore, Edra Energy is insured against any financial loss arising from delays,” it added. — Bernama