KUALA LUMPUR: Malaysian Rating Corporation (MARC) has maintained its AAA rating on TNB Western Energy Bbd’s Sukuk of up to RM4bil with a stable outlook.
The rating agency said on Thursday the rating and outlook were equalised with power giant Tenaga Nasional Bhd
’s (TNB) corporate credit rating of AAA/stable.
This was after taking into account the post-completion rolling guarantee provided by the parent to fund shortfalls in the finance service account (FSA) for the tenure of the Sukuk.
The rating was also underpinned by the close operational proximity between the entities and TNB’s undertaking to maintain full ownership of TNB Western Energy through TNB Manjung Five Sdn Bhd (TNB Manjung Five).
To recap, TNB Western Energy is the funding vehicle of parent TNB Manjung Five, a unit of TNB.
TNB had on Aug 16, 2013 awarded TNB Manjung Five a 25-year concession agreement to build and manage a 1,000-megawatt coal-fired ultra-supercritical pressure steam power plant.
The power plant, sited on a reclaimed island at Manjung, Perak, started operations on Sept 28, 2017, three days earlier than its scheduled commercial operation date.
The total development cost of the power plant of RM5.05bil was within the revised budget of RM5.11 billion.
A key risk during the operations phase is the failure to meet the minimum performance requirement under the power purchase agreement (PPA).
In this regard, MARC opines that the warranties in the engineering, procurement and construction contract during the initial operating phase are adequate to mitigate any high impact losses.
TNB Western Energy has contracted sister company TNB Repair & Maintenance Sdn Bhd (TNB Remaco) to operate and maintain the power plant under a 25-year operations and maintenance agreement (OMA).
MARC views the O&M provider as experienced and competent. While the liabilities of TNB Remaco under the OMA are capped at a level which exposes TNB Western Energy to the risk of revenue losses, MARC believes the operations and maintenance provider will be sufficiently motivated to resolve issues promptly.
In terms of fuel supply risk, this is adequately addressed through a long-term coal supply and transportation agreement with TNB Fuel Services Sdn Bhd.
The risk is further mitigated by the close proximity between TNB Manjung Five and neighbouring power plants, which allows the plants to share coal yard and jetty facilities.
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