Tanjung Bin's credit metrics to stay solid, says RAM Rating

KUALA LUMPUR: Independent power producer (IPP) Tanjung Bin Power Sdn Bhd's credit metrics are expected to stay solid with strong cash balances, says RAM Ratings.

It said on Friday, Tajung Bin's minimum finance service coverage ratio (FSCR) – with cash balances, post-distribution and calculated on repayment dates – was at 1.65 times for the remaining tenure of the Sukuk Ijarah programme of up to RM4.5bil in nominal value (2012/2029).

RAM Ratings said this was despite stress test assumptions of full available capacity payments and daily utilisation payments losses in certain years. 

To recap, Tanjung Bin was granted the right to construct, own and operate a 2,100-MW coal-fired power plant in Tanjung Bin, Johor, under a power purchase agreement  with Tenaga Nasional Bhd which expires on Sept 27, 2031.

RAM Ratings said it had also reaffirmed the AA2/Stable rating of Tanjung Bin's  Sukuk.

“In our assessment of its distribution policy, the company had represented that it would pay its subordinated debt obligations and dividends, subject to meeting financial covenants under the Sukuk throughout the Sukuk’s tenure, as opposed to only in the year of assessment,” it said.

RAM Ratings said the rating continued to reflect Tanjung Bin's robust debt-coverage levels owing to strong cashflow generation and a well-matched debt repayment profile. 

The rating was also supported by the company’s strong business profile, backed by the favourable terms of its PPA with Tenaga, its sole off-taker. 

As with other IPPs, Tanjung Bin remains exposed to regulatory and single-project risks.

During the review period, the company had seen a slight deterioration in its operating performance, mainly due to boiler tube leaks. 

Even so, the company claimed full available capacity payments and incurred only a minimal loss in daily utilisation payments, which was fully offset by bonus payments. Additionally, the company had fully passed through its fuel costs to Tenaga.