File pic of Malakoff Corp Bhd's coal-fired Tanjung Bin Power Plant in Johor
KUALA LUMPUR: Malakoff Corporation Bhd
is expected to seek funding to refinance a payment under Tanjung Bin Energy Issuer Bhd’s (TBE Issuer) equity bridge loan due on Feb 28, 2017.
RAM Rating Services Bhd said on Friday there was RM1.25bil outstanding as at end-2015 which Malakoff, Southeast Asia's largest independent power producer, would have to seek funding to refinance the bullet repayment.
“Malakoff’s long-standing presence in the local power industry and its access to capital markets and external funding sources such as bank borrowings would assist it in refinancing the equity bridge loan,” it said.
RAM Ratings said in this regard, it was informed by Malakoff that it has commenced a fundraising exercise and “is planning the issuance of quasi-equity instruments by early 2017”.
The ratings agency said it would closely monitor the progress of the refinancing plan as the maturity date of the equity bridge loan draws near.
RAM Ratings also said it had reaffirmed the AA3/Stable rating of TBE Issuer's RM3.29bil Sukuk Murabahah (2012/2032).
The rating reflects TBE Issuer’s continued strong debt-servicing ability, underlined by expected healthy cashflows from the recently completed super-critical 1,000-MW coal-fired power plant in Tanjung Bin, Johor.
The rating is also supported by the favourable terms of its power-purchase agreement (PPA) with Tenaga Nasional Bhd (TNB).
TBE Issuer is also exposed to refinancing risk in respect of of the equity bridge loan from Malakoff, which is the project sponsor and tentially higher barging costs for coal delivery due to the high utilisation of its shared coal-handling facilities.
As a unit of Tanjung Bin Energy Sdn Bhd (TBE), TBE Issuer is the turnkey contractor tasked with developing, constructing and financing the Plant for TBE.
TBE, which is a unit of Malakoff, in turn has a 25-year PPA with TNB to develop, finance, construct and operate the Plant.
TBE Issuer’s financial commitments will be supported by back-to-back payments from TBE.
“In this regard, RAM recognises the strong credit link between these entities and views them in aggregate.
“While the main section of the plant commenced operations on March 21, 2016, TBE is expecting higher utilisation rate of the existing coal-handling facilities shared with its sister company, Tanjung Bin Power Sdn Bhd,” it said.
RAM Ratings said a permanent solution including the proposal to construct a new jetty is being explored. Pending resolution of the congestion at the existing jetty, TBE would have to incur barging costs for coal delivery.
“Our assessment shows that TBE Issuer will be able to withstand some delay in the completion of the proposed jetty, although construction cost overruns or plant underperformance may warrant a rating reassessment,” highlights Chong Van Nee, RAM’s Co-Head of Infrastructure & Utilities Ratings.
TBE Issuer’s credit metrics are envisaged to stay strong, with its minimum finance service coverage ratio (FSCR, with cash balances, post-distribution) projected to be 1.56 times for the remaining tenure of the Sukuk despite stress-test assumptions of higher unscheduled outage rates, operational and capital expenditure.
The rating also takes account of the company’s healthy liquidity profile which is buffered by standby letters of credit – expected to be renewed every six months – to ensure that the project company’s finance service reserve account is fully funded, acting as a cushion to meet any deficit in financial obligations.
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