profile search
latest updates
Press Release
11 Dec | Friday
RAM Ratings assigns preliminary ratings to Pulau Indah Power Plant’s proposed RM2.905 bil sukuk

RAM Ratings has assigned preliminary ratings to Pulau Indah Power Plant Sdn Bhd’s (PIPP or the Company) proposed RM2.905 bil Sukuk Wakalah Bi Al-Istithmar (2020/2038) (the Proposed Sukuk), as follows:
 

Sukuk Wakalah Rating/Outlook
RM2.655 bil Class A AA3/Stable
RM250 mil Subordinated Class B AAA(fg)/Stable
 
PIPP is jointly owned by Worldwide Holdings Berhad (Worldwide, 75%) and Korea Electric Power Corporation (KEPCO, 25%) (collectively known as the Sponsors). Under a 21-year Power Purchase Agreement (PPA) with Tenaga Nasional Berhad (TNB), PIPP has been contracted to design, construct, own, operate and maintain a 1,200 MW combined-cycle gas-turbine (CCGT) power plant (the Plant or the Project) in Pulau Indah, Selangor. The Plant will consist of two single-shaft CCGT generating blocks utilising General Electric Company’s (GE) 600 MW 9HA.01 gas turbines. The scheduled commercial operations date (COD) for the Plant is targeted as 1 January 2024. Limited notice to proceed is already underway. 
 
The proposed Class B Sukuk benefits from a guarantee from Danajamin Nasional Berhad (rated AAA/stable), as the Al-Kafalah provider. The enhanced rating of the proposed Class B Sukuk reflects Danajamin’s long-term rating. The proposed Class B Sukuk is subordinated to the proposed Class A Sukuk in terms of priority of cashflow and security. 
 
The preliminary rating for the Proposed Class A Sukuk reflects PIPP’s sound project fundamentals, backed by favourable PPA terms. TNB (rated AAA by RAM) will make availability capacity payments to PIPP, subject to the latter meeting the requirements on the Plant’s available capacity and unscheduled outage rates. PIPP can also fully pass through its fuel costs to TNB via energy payments received from the sale of electricity, provided the Plant operates within the heat rates stipulated in the PPA. 
 
The Project will be backed by a Long-Term Service Agreement (LTSA) with GE throughout the life of the PPA, thus providing comprehensive coverage on the gas turbines. PIPP will also be able to rely on KEPCO’s experience as an operation and maintenance service provider to maintain the rest of the equipment not covered by the LTSA. Meanwhile, PIPP’s projected debt coverage is deemed strong, anchored by its predictable cashflow. 
 
The abovementioned strengths are, however, tempered by exposure of the Project to construction risk. PIPP will be able to leverage the experience of KEPCO and the engineering, procurement, construction and commissioning (EPCC) consortium (comprising POSCO Engineering & Construction Co Ltd, PEC Powercon Sdn Bhd and Mitsubishi Corporation) in constructing new plants, to ensure timely delivery, especially when navigating the repercussion of the COVID-19 pandemic. EPCC cost will be contained through a lump-sum turnkey contract. 
 
Our sensitised scenario incorporates a contingency sum (6% of the EPCC contract sum) that will cover a six-month delay in completion and cost overruns amounting to 2% of the EPCC contract sum. This is deemed adequate when coupled with the Sponsors’ contingent equity contribution of RM30 mil. The EPCC Contract also provides for liquidated damages that will amply compensate payments to TNB in the event of any construction delay or shortfall in performance guarantees. 
 
Based on RAM’s stressed scenario, PIPP’s debt-servicing metrics are deemed strong, as reflected by its respective minimum and average annual senior finance service coverage ratios (with cash balances) of 1.50 and 1.66 times throughout the tenure of the proposed RM2.655 bil Senior Class A Sukuk – which commensurate with its rating. Our sensitised cashflow analysis assumes operational hiccups upon COD and at the end of each contract-year block, zero fuel margins and hefty operating expenditure. 
 
Analytical contact
Jack Kwan
(603) 3385 2532
jack@ram.com.my
 
Media contact
Padthma Subbiah
(603) 3385 2577
padthma@ram.com.my
 
Date of release: 10 December 2020
 
 
The credit rating is not a recommendation to purchase, sell or hold a security, in as much 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 2020 by RAM Rating Services Berhad
source: RAM Rating Services
Print Mail Twitter LinkedIn Facebook Google+
Past Articles
2021
September
August
July
June
May
April
March
February
January
2020
December
November
October
September
August
June
February
January
2019
December
November
October
September
August
July
June
May
April
March
January
2018
December
November
October
September
August
July
June
May
April
March
February
January
2017
December
November
October
September
August
July
June
May
April
March
February
January
2016
December
November
September
July
June
May
April
March
2015
June
May
April
March
February
January
2014
December
November
October
September
August
July
June
May
April
March
February
January
2013
December
October
July
May
April
March
2012
December