KUALA LUMPUR: RAM Rating Services Bhd has reaffirmed the AA3 rating of Tanjung Bin Power Sdn Bhd's RM5.57 billion Istisna' Medium-Term Notes Programme (2003/2018) (IMTN), with a stable outlook.
Tanjung Bin Power is an independent power producer (IPP) that owns and operates a 2,100-MW coal-fired power plant in Tanjung Bin, Johor.
The rating agency said on Tuesday, May 24 the rating is supported by the company's strong business profile, underscored by the favourable terms of its Power Purchase Agreement (PPA) with TENAGA NASIONAL BHD [] (TNB) and healthy debt-servicing ability.
Notably, the plant has complied with the PPA operating requirements since commercial operations, thus enabling Tanjung Bin power to earn full available capacity payments (ACPs) and fully pass through its fuel costs in its first contract year block (from Sept 28, 2006 to Dec 31, 2010). However, there had been increased operational hiccups since early-2010 that had brought the plant's unscheduled outage rate (UOR) to 5.95% as at end-December 2010, that is close to the PPA's 6% unscheduled outage limit (UOL).
RAM Ratings said notably, the plant experienced a major outage between January and May 2011. Fortunately, the PPA's UOR calculation resets at the start of a contract year block (on Jan 1, 2011), thereby allowing the plant to avoid a UOL breach during the course of the major outage.
Although the problem has been resolved, the UOR still came up to 5.5% as at May 9, 2011. There is therefore little room for further unscheduled outages in the near term.
RAM Ratings will monitor the Plant's performance and provide an update if there is any breach of the PPA's operating parameters that results in significant revenue loss.
In FY ended Dec 31, 2010 (FY Dec 2010), Tanjung Bin Power's finance service coverage ratios (FSCRs) without and with cash balances (post-distribution) remained healthy at 1.02 and 1.90 times, respectively (FY Dec 2009: 1.72 times and 2.17 times).
RAM Ratings also said the lower ratios were due to a temporary mismatch between receipts from TNB and payments to the Company's coal supplier as at end-December 2010.
Although RAM Ratings' sensitised cashflow analysis assumes some revenue loss due to operational hiccups, we still expect Tanjung Bin Power to generate a healthy annual pre-financing cashflow of around RM1 billion.
After factoring in annual distributions to its shareholders while simultaneously adhering to its financial covenants on a forward-looking basis (as opposed to only the year of assessment), however, the company's minimum and average FSCRs (with cash balances, post-distribution and calculated on principal repayment dates) are expected to come up to 1.40 times and 1.57 times, respectively.
Such financial covenants include the finance service reserve account requirement and a post-distribution FSCR of 1.4 times.
Similar to all other IPPs, Tanjung Bin Power remains exposed to regulatory and single-project risks.
Tanjung Bin Power is an independent power producer (IPP) that owns and operates a 2,100-MW coal-fired power plant in Tanjung Bin, Johor.
The rating agency said on Tuesday, May 24 the rating is supported by the company's strong business profile, underscored by the favourable terms of its Power Purchase Agreement (PPA) with TENAGA NASIONAL BHD [] (TNB) and healthy debt-servicing ability.
Notably, the plant has complied with the PPA operating requirements since commercial operations, thus enabling Tanjung Bin power to earn full available capacity payments (ACPs) and fully pass through its fuel costs in its first contract year block (from Sept 28, 2006 to Dec 31, 2010). However, there had been increased operational hiccups since early-2010 that had brought the plant's unscheduled outage rate (UOR) to 5.95% as at end-December 2010, that is close to the PPA's 6% unscheduled outage limit (UOL).
RAM Ratings said notably, the plant experienced a major outage between January and May 2011. Fortunately, the PPA's UOR calculation resets at the start of a contract year block (on Jan 1, 2011), thereby allowing the plant to avoid a UOL breach during the course of the major outage.
Although the problem has been resolved, the UOR still came up to 5.5% as at May 9, 2011. There is therefore little room for further unscheduled outages in the near term.
RAM Ratings will monitor the Plant's performance and provide an update if there is any breach of the PPA's operating parameters that results in significant revenue loss.
In FY ended Dec 31, 2010 (FY Dec 2010), Tanjung Bin Power's finance service coverage ratios (FSCRs) without and with cash balances (post-distribution) remained healthy at 1.02 and 1.90 times, respectively (FY Dec 2009: 1.72 times and 2.17 times).
RAM Ratings also said the lower ratios were due to a temporary mismatch between receipts from TNB and payments to the Company's coal supplier as at end-December 2010.
Although RAM Ratings' sensitised cashflow analysis assumes some revenue loss due to operational hiccups, we still expect Tanjung Bin Power to generate a healthy annual pre-financing cashflow of around RM1 billion.
After factoring in annual distributions to its shareholders while simultaneously adhering to its financial covenants on a forward-looking basis (as opposed to only the year of assessment), however, the company's minimum and average FSCRs (with cash balances, post-distribution and calculated on principal repayment dates) are expected to come up to 1.40 times and 1.57 times, respectively.
Such financial covenants include the finance service reserve account requirement and a post-distribution FSCR of 1.4 times.
Similar to all other IPPs, Tanjung Bin Power remains exposed to regulatory and single-project risks.
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