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Press Release
28 Mar | Tuesday
RAM Ratings reaffirms Musteq Hydro’s AAA(bg) sukuk rating
RAM Ratings has reaffirmed the enhanced AAA(bg)/Stable rating of Musteq Hydro Sdn Bhd’s (Musteq or the Company) RM80 million Bank-Guaranteed Sukuk Musharakah (2012/2022). The rating reflects an unconditional and irrevocable bank guarantee provided by Maybank Islamic Berhad (rated AAA/Stable/P1 by RAM), which enhances the credit profile of the sukuk beyond Musteq’s stand-alone credit strength. Musteq is an independent power producer (IPP) that owns and operates a 20-MW hydro power plant (the Plant) in Sungai Kenerong, Kelantan, under a Power Purchase Agreement with Tenaga Nasional Berhad that will expire on 19 December 2030.

Musteq’s debt-servicing ability remained weak as only one of the Plant’s four generators was operational in 2016 while the remaining units continued to undergo repairs for damage wreaked by floods in 2015. The Plant had again been idle since end-January 2017 after floods disrupted employees’ access to it. Considering its cash balance of RM0.59 million as at 20 February 2017, we expect the Company to face another cash shortfall on the next profit payment (RM1.13 million) date of 26 July 2017, should the Plant remain inoperable. Musteq expects the Plant to resume full operations by end-March 2017. Even if Musteq manages to meet the said profit payment, it is expected to face a potential default on 26 January 2018 in the absence of support from its parent company, Eden Inc Bhd, when a principal and profit payment of RM11.13 million becomes due. In this regard, Eden Inc has represented that support will be forthcoming to ensure that upcoming principal and profit payments are met. Eden Inc had previously infused additional cash into the Company to settle debt obligations due in January 2016 and January 2017.
source: RAM Rating Services Berhad
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