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Press Release
02 Aug | Thursday
RAM Ratings reaffirms NUR Power’s AAA(bg) and AAA(fg) sukuk ratings
RAM Ratings has reaffirmed the respective AAA(bg)/Stable and AAA(fg)/Stable ratings of Tranche 1 and Tranche 2 of NUR Power Sdn Bhd’s (NUR Power or the Group) RM650 million Guaranteed Sukuk Mudharabah (2012/2027) (the Sukuk). The ratings reflect the irrevocable and unconditional guarantees extended by Maybank Islamic Berhad and Danajamin Nasional Berhad (collectively, the Guarantors), which enhance the credit profile of the Sukuk beyond NUR Power’s credit strength.
 
NUR Power is a small-scale vertically integrated power utility, and the sole electricity supplier to the Kulim Hi-Tech Park (the Park) under a mandate from the Government of Malaysia (effective until 27 May 2033). The Group mainly serves industrial customers, which contribute approximately 97% of its electricity sales. 
 
Despite the above, the Group remains susceptible to sector- and customer-concentration risks. NUR Power’s top seven customers – First Solar, Infineon, Silterra, Intel, Fuji, Panasonic and KIG – collectively consumed about 79.7% of the Group’s electricity sales in 2017 (past 3-year average: 81.3%). In 2017, the Group’s electricity sales declined 5.6% y-o-y – the first time since the economic downturn in 2012, mainly due to reduced take-up by its largest customer, First Solar (M) Sdn Bhd. First Solar, a solar panel manufacturing company, took down part of its manufacturing capacity for a factory retooling, to enable manufacturing of a new line of photovoltaic module. First Solar completed the exercise in May 2018 and is now steadily ramping up its production, after which electricity demand from First Solar is expected to be higher than prior to the retooling exercise. NUR Power inevitably depends on the performances of its key customers engaged in high-technology industries, which are largely from the electrical and electronic as well as solar panel-manufacturing industries; they are susceptible to externalities, including protectionist policies, industry cycles and economic downturns. 
 
The Group has maintained the commendable operating track record of its power plant in the last five years, since both its combined-cycle gas-turbine blocks became operational in 2012. Its margins narrowed in FY Dec 2017 due to lower revenue from electricity sales and elevated costs as a result of higher gas prices and scheduled maintenance expenses. 
 
The implementation of incentive-based regulation, similar to that of Tenaga Nasional Berhad (TNB), is deemed favourable to NUR Power. Essentially, this framework enables NUR Power to pass through to its customers all cost fluctuations stemming from gas prices and energy supply rates for electricity purchases from TNB, via the imbalance cost-pass-through mechanism. This will help stabilise the Group’s long-term financial profile. We expect NUR Power’s cashflow-generating capability to remain intact on account of healthy demand at the Park. This, coupled with continuous debt repayments, support our expectation of a further strengthening of the Group’s already sturdy balance sheet.
 
 
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: 2 August 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
 Copyright 2018 by RAM Rating Services Berhad
RAM Ratings has reaffirmed the respective AAA(bg)/Stable and AAA(fg)/Stable ratings of Tranche 1 and Tranche 2 of NUR Power Sdn Bhd’s (NUR Power or the Group) RM650 million Guaranteed Sukuk Mudharabah (2012/2027) (the Sukuk). The ratings reflect the irrevocable and unconditional guarantees extended by Maybank Islamic Berhad and Danajamin Nasional Berhad (collectively, the Guarantors), which enhance the credit profile of the Sukuk beyond NUR Power’s credit strength.
 
NUR Power is a small-scale vertically integrated power utility, and the sole electricity supplier to the Kulim Hi-Tech Park (the Park) under a mandate from the Government of Malaysia (effective until 27 May 2033). The Group mainly serves industrial customers, which contribute approximately 97% of its electricity sales. 
 
Despite the above, the Group remains susceptible to sector- and customer-concentration risks. NUR Power’s top seven customers – First Solar, Infineon, Silterra, Intel, Fuji, Panasonic and KIG – collectively consumed about 79.7% of the Group’s electricity sales in 2017 (past 3-year average: 81.3%). In 2017, the Group’s electricity sales declined 5.6% y-o-y – the first time since the economic downturn in 2012, mainly due to reduced take-up by its largest customer, First Solar (M) Sdn Bhd. First Solar, a solar panel manufacturing company, took down part of its manufacturing capacity for a factory retooling, to enable manufacturing of a new line of photovoltaic module. First Solar completed the exercise in May 2018 and is now steadily ramping up its production, after which electricity demand from First Solar is expected to be higher than prior to the retooling exercise. NUR Power inevitably depends on the performances of its key customers engaged in high-technology industries, which are largely from the electrical and electronic as well as solar panel-manufacturing industries; they are susceptible to externalities, including protectionist policies, industry cycles and economic downturns. 
 
The Group has maintained the commendable operating track record of its power plant in the last five years, since both its combined-cycle gas-turbine blocks became operational in 2012. Its margins narrowed in FY Dec 2017 due to lower revenue from electricity sales and elevated costs as a result of higher gas prices and scheduled maintenance expenses. 
 
The implementation of incentive-based regulation, similar to that of Tenaga Nasional Berhad (TNB), is deemed favourable to NUR Power. Essentially, this framework enables NUR Power to pass through to its customers all cost fluctuations stemming from gas prices and energy supply rates for electricity purchases from TNB, via the imbalance cost-pass-through mechanism. This will help stabilise the Group’s long-term financial profile. We expect NUR Power’s cashflow-generating capability to remain intact on account of healthy demand at the Park. This, coupled with continuous debt repayments, support our expectation of a further strengthening of the Group’s already sturdy balance sheet.
 
 
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: 2 August 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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