Malakoff’s power-generation subsidiary proposes RM4.5b Islamic bonds
KUALA LUMPUR (Dec 31): Malakoff Corp Bhd’s wholly-owned subsidiary Tanjung Bin Energy Sdn Bhd (TBE) has proposed to issue RM4.5 billion worth of Islamic bonds or sukuk, the proceeds of which will be used to repay money owed by TBE to its 100%-owned turnkey contractor Tanjung Bin Energy Issuer Bhd (TBE Issuer), according to RAM Ratings.
RAM Ratings analysts Chong Van Nee and Aw Wei Xuan wrote in a note yesterday TBE is an independent power producer (IPP) that owns and operates an ultra-supercritical 1,000MW coal-fired power plant in Tanjung Bin, Johor under a 25-year power purchase agreement (PPA) with Tenaga Nasional Bhd (TNB).
The PPA will expire in March 2041, Chong and Aw said. “RAM Ratings has assigned a preliminary ‘AA3/Stable’ rating to TBE’s proposed RM4.5 billion Islamic MTN (medium-term notes) programme,” they said.
“The preliminary rating is anchored by TBE’s strong project economics underscored by the PPA’s terms. Supported by predictable availability-based capacity payments (ACPs) with no exposure to demand risk, TBE’s cash flow-generating aptitude has remained relatively stable despite some teething issues since it commenced operations in March 2016.
“Those problems were resolved in 2019. Although still short of the PPA’s requirements, the plant’s rolling unscheduled outage rate of 7.01% as at end-November 2020 was a stark improvement over the 13.14% as at end-December 2018.
“Consequently, the quantum of revenue loss [as measured by reductions in ACPs] was lower, leading to a turnaround in its profit performance. Except in 11M20 (the cumulative 11 months of 2020), TBE has been recording positive fuel margins since the commencement of its operations,” the analysts said.
At the time of writing today, Malakoff had not issued a statement to Bursa Malaysia on TBE’s proposed RM4.5 billion sukuk issuance.
According to RAM Ratings’ note, Malakoff, which was listed on Bursa in May 2015, has a long-established presence and boasts the biggest portfolio of IPPs in Peninsular Malaysia.
The analysts said Malakoff accounted for some 22% of Peninsular Malaysia’s overall installed power-generation capacity as of February 2020.
“Given the (TBE’s) plant’s significance as Malakoff’s single-largest generating unit, we believe the latter (Malakoff) is strongly committed to TBE as evident from its historical support in the form of equity injections,” the analysts said.
As with other IPPs, TBE remains exposed to regulatory and single-project risks, according to them.
The analysts said the impact of a force majeure event or a major operational failure would be amplified by TBE’s plant’s single-generating-unit configuration, as opposed to other IPPs’ multiple units.
On Bursa today, Malakoff’s share price had fallen half a sen or 0.55% to 90.5 sen as at 10.40am, giving the stock a market capitalisation of about RM4.43 billion. Its reported number of issued shares stood at 4.89 billion units.
Source: TheEdgeMarkets