KUALA LUMPUR: RAM Ratings has assigned an AAA/Stable rating to Tenaga Nasional Bhd
’s (TNB) proposed Islamic medium-term notes Sukuk Wakalah Programme of up to RM5bil in nominal value (2017/2067), premised on the group’s strategic position as the national utility company coupled with its solid business and healthy financial profiles.
The utilisation of the proposed sukuk programme includes financing TNB’s capital expenditure, investments and working capital requirements.
“Based on our rating methodology for government-linked entities, TNB enjoys a very high likelihood of extraordinary government support in the event of financial distress, given its role that is deemed critical to the nation and the group’s very strong relationship with the Government.
“The Government, on top of its special share in TNB, jointly with various government agencies owns an aggregate 62% stake in the group,” RAM Ratings said in a statement.
The rating agency said TNB had remained a dominant player in the domestic power-generation business, controlling 56% of the peninsula’s total installed capacity as at end-February 2017 – this is expected to increase to approximately 57% by 2020.
It added that the group also played a crucial role as the sole off-taker of generating capacity and electrical energy produced by independent power producers in Peninsular Malaysia.
RAM Ratings said despite the Government’s decision to raise the regulated price of piped gas to RM22.70 per million metric British thermal units (mmBTU) in July 2017 (January 2017: RM21.20/mmBtu), TNB’s average net tariff was maintained at 37.01 sen/kWh with a 2.54 sen/kWh imbalance cost pass-through (ICPT) subsidy for the period between July and December 2017.
Although fuel costs were higher than benchmark fuel prices under the incentive-based regulation, which should result in a tariff increase of 1.02 sen/kWh above the base rate of 38.53 sen/kWh, the Government had decided to absorb the difference and retained the existing rebate of 1.52 sen/kWh.
“TNB’s adjusted gearing ratio and funds from operations debt coverage are envisaged to stay within RAM’s expectations after factoring in the full issuance of RM5bil from the proposed sukuk programme, albeit weaker at a respective 1.25 times and 0.20 times for FY Aug 2017 (FY Aug 2016: 1.17 times and 0.27 times).
“However, the drawdown amount is expected to be less than RM5bil. The group aspires to secure up to 5,000 MW of new generation capacity internationally by 2020. This could cause TNB’s financial metrics to deteriorate slightly if it takes on more borrowings to fund such acquisitions, without corresponding incremental earnings from earlier purchases,” RAM Ratings said.
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