RATING Agency Malaysia Bhd (RAM) has reaffirmed the AA1 rating assigned to Sarawak Electricity Supply Corps (Sesco) RM605mil Al-Bai Bithaman Ajil Islamic debt securities.
The rating was premised on Sesco's strong financial profile and its strategic role as the sole utility company in Sarawak, RAM said in a statement.
Sesco enjoys implicit support from the Sarawak government by virtue of the latter's direct and indirect shareholdings in the company. Electricity consumption in Sarawak grew by 5.9% in 2002 to 3.25 million MWh, exceeding RAM's expectations of 3%-5% growth.
The increase in electricity consumption arose from a significant pick-up in electricity demand during the second half of the year, spurred by more robust industrial activities.
Based on the nine-month electricity sales of 2.58 million MWh, RAM expected Sarawak's electricity demand to grow by around 5% to 6% this year.
As a result of the increase in electricity units sold, Sesco's turnover rose by 6.42% to RM863.58mil in financial year 2002 from RM811.49mil previously.
However, Sesco's profit margins declined from the previous year, largely due to higher fuel costs. RAM's analysis showed that Sesco's operating profit before depreciation, interest and tax margin has been sliding falling from 44.04% in financial year 1999 to 28.4% in the first half of financial year 2002.
Besides the steeper fuel costs, the higher cost of electricity purchased from independent power producers also squeezed Sesco's profit margins over the years.
The anticipated entry of Gulf International Investment Group as major shareholder in Bakun project had resulted in some uncertainties with regard to the mammoth undertaking. With a private investor in the picture, it was not likely that Sesco would be able to source electricity from Bakun at highly favourable rates as previously anticipated, RAM said. Bernama
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