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27 Jul | Friday
RAM Ratings reaffirms Tanjung Bin Power’s AA2 sukuk rating
RAM Ratings has reaffirmed the AA2/Stable rating of Tanjung Bin Power Sdn Bhd’s (TBP or the Company) Sukuk Ijarah Programme of up to RM4.5 billion in nominal value (2012/2029) (the Sukuk), premised on the Company’s robust debt-coverage profile. The rating is also supported by the favourable terms of the Company’s Power Purchase Agreement (PPA) with Tenaga Nasional Berhad (TNB), its sole off-taker. As with other independent power producers (IPPs), TBP remains exposed to regulatory and single-project risks.
 
During the review period, TBP had claimed full available capacity payments (ACPs) and incurred only a minimal loss in daily utilisation payments (DUPs), which was fully offset by bonus payments. Additionally, the Company had fully passed through its fuel costs to TNB. 
 
Despite a larger than expected distribution outflow of RM961 million in fiscal 2017, TBP registered a finance service coverage ratio (FSCR) (with cash balances, post-distribution and calculated on repayment dates) of 13.04 times. Moving forward, TBP’s credit metrics are expected to stay solid, with its minimum FSCR (with cash balances, post-distribution and calculated on repayment dates) standing at 1.65 times for the remaining tenure of the Sukuk despite stress-test assumptions of ACP and DUP losses in certain years. In our assessment of its distribution policy, the Company had represented that it would pay its subordinated debt obligations and dividends, subject to meeting financial covenants under the Sukuk throughout the tenure of the facility, as opposed to only in the year of assessment.
 
TBP is an IPP that has been granted the right to construct, own and operate a 2,100-MW coal-fired power plant in Tanjung Bin, Johor, under a PPA with TNB which expires on 27 September 2031.
 

Analytical contact
Ong Ju Laine
(603) 7628 1183
julaine@ram.com.my
 
Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my
 
Date of release: 27 July 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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