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Press Release
21 Jun | Thursday
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 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 cashflow-generating and debt-servicing capabilities remain fragile despite the Plant having partially recommenced operations since July 2017. The Plant had been forced to halt operations on several occasions since 2015 due to heavy flooding, the latest being in the first half of 2017, and the units that were functional had continued to face numerous 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. While its cash balances of RM3.1 million as at end-April 2018 are viewed sufficient to cover an impending profit payment of RM0.9 million due on 26 July 2018, we expect Musteq to face another cash shortfall on 26 January 2019 when its next principal payment of RM10.9 million becomes due, if the Plant is unable to operate at full capacity. In this regard, Eden Inc Berhad, Musteq’s parent company, has represented that it remains committed to supporting Musteq financially. To date, Eden Inc has pumped in RM44.0 million into the Company to meet capex and finance service requirements.
 
Analytical contact
Nurhayati Sulaiman
(603) 7628 1040
yati@ram.com.my
 
Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my
 
Date of release: 21 June 2018
 
 
The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.
 
RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.
 
Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.
 
Published by RAM Rating Services Berhad
Ó Copyright 2018 by RAM Rating Services Berhad
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