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RAM reaffirms AA3/Stable rating of Jimah Energy Ventures' Sukuk.

RAM Ratings has reaffirmed the AA3/Stable rating of Jimah Energy Ventures Sdn Bhd's (JEV or the Company) MYR 4.85 billion Senior IMTN Facility (2005/2025).

"The reaffirmation of the rating is premised on JEV's stable business profile, underscored by the favourable terms of its PPA with TNB and its strong cashflow-generation ability. We derive further comfort from the sturdy credit profile of TNB, whose debt issue is rated AAA/Stable by RAM. JEV is an independent power producer that owns and operates a 1,400-MW coal-fired power plant (the Plant) in Port Dickson, Negeri Sembilan, under a 25-year Power Purchase Agreement (PPA) with Tenaga Nasional Berhad (TNB), its sole off-taker.

"As expected, JEV registered a strong finance service coverage ratio (FSCR) of 1.63 times (with cash balances, post-distribution, calculated on payment dates) and supported by a cash balance of MYR 103.66 million on the last principal repayment date of the Senior IMTN (12 November 2015). Going forward, the Company's average annual pre-financing cashflow of MYR 685.22 million is anticipated to sufficiently support its obligations under the Senior IMTN, even after factoring in proposed dividend payments of MYR 30 million in FY Mar 2016, as reflected by a projected minimum FSCR (with cash balances, post-distribution, calculated on payment dates) of 1.50 times throughout the remaining tenure of the facility. The FSCR also meets RAM's threshold for AA3-rated transactions.

"Meanwhile, both Units 1 and 2 of the Plant had undergone a major overhaul to facilitate modification works on the Plant's economisers, which had been the primary cause of tube failures. As a result, the Company recorded reduced available capacity payments and daily utilisation payments amounting to MYR 64.95 million and MYR 22.95 million in CY 2014 and as at 9M CY 2015, respectively. However, the reduced payments from TNB are not anticipated to have any financial impact on JEV as it is expected to be compensated by the operations and maintenance service provider, Jimah O&M Sdn Bhd.

"As with other IPPs, JEV remains exposed to regulatory and single-project risks."

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Publication:CPI Financial
Date:Jan 13, 2016
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