KUALA LUMPUR: Malaysian Rating Corp Bhd (MARC) has affirmed its AA-IS rating on Malakoff Power Bhd's (MPower) RM5.4 billion Sukuk Murabahah with a stable outlook.
MARC in a statement today said the stable outlook incorporates expectation that Malakoff Corp Bhd's power generating subsidiaries will continue delivering satisfactory operational performance.
"The rating approach considers the consolidated credit profile of MPower and its parent company Malakoff given the strong operational and financial linkages between them, in particular the common reliance on residual cash flows from Malakoff's power plants and the parent company's explicit Kafalah guarantee in favour of MPower's sukukholders.
"The affirmed rating mainly reflects the predictability of cash flows from Malakoff's power plants under long-term power purchase agreements (PPA) with Tenaga Nasional Bhd (TNB).
"The Covid-19 pandemic is not expected to materially impact the group's earnings given the availability-based capacity payments under the PPAs between its domestic power plants and TNB, which allocate demand risk to the offtaker," it said.
MPower is the operations and maintenance operator of its parent company Malakoff's majority-owned domestic power plants.
MARC said while lower dispatch demand from TNB during the Movement Control Order (MCO) period led to a 14.4 per cent year-on-year (Y-o-Y) decline in Malakoff's revenue, most of the group's power plants exhibited strong operational performance and received full capacity payments during the period.
It said Malakoff's capacity payments were relatively stable, amounting to RM1.56 billion.
MARC said Malakoff's cash flow from operations remained healthy at RM1.38 billion in nine-month period of 2020.
Its liquidity was strong with cash balances of RM4.6 billion as at end-September 2020.
"The group's leverage position improved to 1.73x following the full repayment of its Macarthur wind farm acquisition loan and principal repayment of Tanjung Bin Power's sukuk.
"Leverage position is expected to continue improving as MPower repays its scheduled sukuk obligations, while any new debt taken on for planned capex in the near term will be spread out over five years during the construction of the assets," it said.