KUALA LUMPUR: MARC Ratings has assigned final ratings of MARC-1 IS /AA- IS to Malakoff Power Bhd's (MPower) RM1.2 billion Islamic commercial papers and Islamic medium-term notes (ICP/IMTN) programmes.
The ratings are underpinned by sufficient and predictable cash flows from Malakoff's independent power producers (IPPs) and waste management subsidiary Alam Flora Sdn Bhd to service MPower's obligations.
The rating agency said the rating outlook is stable, on MARC Ratings' expectation that Malakoff's key subsidiaries will continue delivering satisfactory operational performance and upstream dividends as projected to MPower.
MARC said it reviewed the final documentation for the programmes and was satisfied that the terms and conditions have not changed in any material way from the draft documentation on which the preliminary ratings were based.
MPower is the operations and maintenance (O&M) operator of IPPs held through companies that are majority-owned by its parent.
"Given the operational linkages between Malakoff and MPower as well as their reliance on residual cash flows from the IPP companies, the rating approach is premised on their consolidated credit profile.
"The Kafalah guarantee provided by Malakoff on the existing sukuk murabahah programme in favour of MPower's sukukholders underscores the rating approach; a similar guarantee will be extended to the ICP/IMTN programmes as well, it said in the report.
The IPP companies have long-term power purchase agreements (PPA) with Tenaga Nasional Bhd (TNB) (AAA/Stable), while Alam Flora has a long-term concession agreement with the government for waste collection and public cleansing in Pahang, Putrajaya and Kuala Lumpur.
"The ratings also consider the group's current expansion into renewable energy projects that will partly mitigate the expiring PPAs of existing power plants; in the next four years, two PPAs of power plants with total capacity of 1,653 megawatts (MW) will expire.
"Moderating the ratings are risks associated with plant performance as well as execution risks in relation to the development and construction of the latest renewable projects, considering the group's limited track record in them at this juncture," it added.
The proceeds from the proposed first issuance of RM493 million under the ICP/MTN programme will be mainly used to finance two new renewable energy projects, namely RP Hydro (84.0MW), and WTE Sg Udang (22.1MW).
The projects are expected to be completed in the second quarter of 2026 (Q2 2026) and Q2 2027.
The rating agency added that operational cash flows from existing assets would be more than sufficient to meet sukuk obligations, including profit payments for the ICP/IMTN programmes, during the construction phase of the new renewable energy projects.
"Furthermore, the favourable repayment profile of the ICP/IMTN programmes, with first principal repayment only due in 2029, provides a comfortable buffer period for Malakoff to rectify any teething issues arising from the projects during both pre- and post-construction phases," it noted.