MARC affirms AAIS rating on TNB Western Energy RM4b sukuk with stable outlook

KUALA LUMPUR: Malaysian Rating Corporation Bhd (MARC) has affirmed AAAIS rating on TNB Western Energy Bhd’s sukuk of up to RM4 billion with a stable outlook.

The rating and outlook are equalised with Tenaga Nasional Bhd’s (TNB) corporate credit rating of AAA/stable and taking into consideration the post-completion rolling guarantee provided by the parent company to fund shortfalls in the finance service account (FSA) for the tenure of the sukuk.

The rating is also underpinned by the close operational proximity between the entities and TNB’s undertaking to maintain full ownership of TNB Western Energy through TNB Manjung Five Sdn Bhd.

TNB Western Energy is the funding vehicle of parent TNB Manjung Five, a

wholly-owned subsidiary of TNB.

TNB Manjung Five was awarded a 25-year concession agreement by TNB on August 16, 2013 to design, construct, own, operate and manage a 1,000-megawatt coal-fired ultra-supercritical pressure steam power plant.

The power plant, sited on a reclaimed island at Manjung, Perak, commenced operations on September 28, 2017, three days earlier than its scheduled commercial operation date.

Total development cost of the power plant of RM5.05 billion was within the revised budget of RM5.11 billion.

Under TNB Western Energy’s base case projections, the project is forecasted to have minimum and average pre-distribution finance service cover ratios (FSCR) with cash of 1.27 times and 1.33 times respectively during the sukuk tenure, MARC said.

“The projected FSCRs are lower than other MARC-rated independent power producers, signalling lower resilience to operational issues,” it said.

In the event of any shortfall in the FSA, MARC expects TNB’s rolling guarantee to be called upon to assist in the timely servicing of the sukuk.

“The rolling guarantee covers scheduled semi-annual distributions on the sukuk on a non-accelerable basis.

“The stable outlook on the rating reflects MARC’s stable view of TNB’s credit profile.

“Any changes in TNB Western Energy’s rating and/or outlook would be primarily driven by a revision of TNB’s rating and/or outlook,” it said.

Related Articles