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24 Jan | Wednesday
RAM Ratings reaffirms AA3/Stable rating of Jimah Energy Ventures’ sukuk

RAM Ratings has reaffirmed the AA3/Stable rating of Jimah Energy Ventures Sdn Bhd’s (JEV or the Company) RM4.85 billion Senior IMTN Facility (2005/2025) (the sukuk). The reaffirmation of the rating is premised on our expectation that JEV will continue to generate a strong cash flow despite operational challenges during the review period that had resulted in minimal reductions in revenue. Additionally, JEV had, during the period, managed to fully pass through its fuel cost to Tenaga Nasional Berhad (TNB), the Company’s sole off-taker. We derive further comfort from the sturdy credit profile of TNB, whose debt issue is rated AAA/Stable by RAM. JEV is an independent power producer (IPP) that owns and operates a 1,400-MW coal-fired power plant (the Plant) in Port Dickson, Negeri Sembilan, under a 25-year Power Purchase Agreement with TNB.
 
JEV registered a strong finance-service coverage ratio (FSCR) of 2.12 times (with cash balances, post-distribution, calculated on payment dates) on the last principal repayment date of the sukuk (10 November 2017), within our expectations. Going forward, the Company’s minimum and average FSCRs (with cash balances, post-distribution, calculated on payment dates) are anticipated to come in at 1.50 times and 1.78 times, respectively, throughout the tenure of the facility. Apart from the assumption that the Company will pay cash dividends of RM49.94 million in FY Dec 2017, backed by the settlement of amounts owing from Jimah O&M Sdn Bhd (JOM), our cashflow analysis has not assumed any dividend payments for the remaining tenure of the sukuk. In assessing JEV’s ongoing distributions to shareholders and payments to Junior Debt holders, our sensitised projections assume that the Company will adhere to distribution covenants on a forward-looking basis throughout the tenure of the sukuk, as opposed to only in the year of assessment.
 
The Plant had experienced a number of unscheduled outages in fiscal 2017, primarily arising from boiler tube leakages and trippings caused by welding issues and faulty current transformers, respectively. This had led the Company to record lower available capacity payments and daily utilisation payments of RM50.16 million as at end-September 2017. However, the reduced payments from TNB are not anticipated to have any financial impact on JEV as the Company is expected to be compensated by the operations and maintenance service provider, JOM, albeit with some delays. As with other IPPs, JEV remains exposed to regulatory and single-project risks.

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