Wednesday, January 5, 2011

RAM Ratings: YTL Power Generation's debt-servicing ability to stay strong

KUALA LUMPUR:'' RAM Rating Services expects YTL Power Generation Sdn Bhd's (YTLPG) debt-servicing ability to stay strong, with an average projected pre-financing operating cashflow of RM400 million annually throughout the tenure of its RM1.3 billion debt notes proramme (2003/2014).

The ratings agency said on Wednesday, Jan 5 this would translate into a minimum projected debt-service coverage ratio (DSCR) of 1.29 times (without cash balances).

'Unlike the other independent power producers (IPPs) within RAM Ratings' portfolio, YTLPG does not have to meet any post-distribution DSCR; the company only has to achieve a DSCR of at least 1.25 times prior to any distribution,' it said in a ratings announcement.

'Despite the possibility of sizeable distributions to its holding company, YTLPG's management is viewed to be unlikely to make distributions to the extent of jeopardising the company's debt-servicing ability.'

YTLPG is a unit of YTL POWER INTERNATIONAL BHD [] which owns and operates two combined-cycle, gas-turbine power plants in Paka, Terengganu (808 MW), and Pasir Gudang, Johor (404 MW).

RAM Ratings had reaffirmed the AA1 rating of YTLPG's RM1.3 billion medium-term notes programme (2003/2014) with a stable outlook.

It said YTLPG's power purchase agreement (PPA) with TENAGA NASIONAL BHD [] shielded it from demand risk as the latter was obliged to take or pay for a minimum quantity of 7,450 GWh of electricity per annum, at a rate of 15.50 sen/kWh.

As such, the take-or-pay minimum quantity assured YTLPG an income of at least RM1.1 billion per annum. During the period under review, the company had continued performing within expectations, having kept its operating parameters within the requirements of its PPA.

However, RAM Ratings said similar to other IPPs, YTLPG remains exposed to site-concentration and regulatory risks.

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