PETALING JAYA: Only three of the 13 bonds issued by independent power producers (IPPs) that AmResearch analysed would suffer a major negative impact from the windfall tax, it said in a credit sector note.
Of the three, two were issued by the Malakoff Bhd group and one by the Jimah group.
The Malakoff bonds that are expected to be hit are the GB3 bonds that “would need to significantly curtail dividend to meet debt-service-coverage ratio covenant in future years” and its senior sukuk, whose “funding model” would be under pressure.
There is “potential for debt restructuring” for the latter.
The Jimah bonds are its SPV-Class A bonds, which face the same situation as Malakoff's senior sukuk and could result in a debt restructuring.
The four major bond issuers analysed in the report are the YTL Power group, the Powertek group, the Malakoff group and the Jimah group.
Major Malakoff bondholders are set to meet with the company's management in the middle of next week on the issue of windfall tax on IPPs.
A source told StarBiz that a letter had been sent to bondholders confirming the meeting.
IPPs, including Malakoff, are seeking to meet the Economic Planning Unit before the scheduled meeting with bondholders.
On June 4, the Government announced a 30% windfall tax on IPPs based on excess return on assets (ROA) exceeding 9%.
On July 1, the windfall tax was gazetted with the ROA based on earnings before interest and tax divided by fixed assets and on a recurring basis.
According to the AmResearch report, this is “the worst-case scenario speculated by the industry.”
The windfall tax is seen by many as a bargaining tool to bring IPPs to the negotiating table to revise their lucrative power purchase agreements (PPAs) with Tenaga Nasional Bhd.
The Government has said it would exempt IPPs from the tax if they successfully renegotiated their PPAs with national utility company.
Trading in IPP bonds has been lacklustre since the windfall tax was announced.
“People are just shying away from IPP bonds because they don't know what is going on,” said a fixed income head at a local brokerage.
IPPs account for about 21% of all ringgit-denominated bonds in issue.
A fund manager at a Kuala Lumpur-based asset house said the outcome of the proposed meetings was uncertain.
“The IPPs are trying to find out what exactly the EPU wants and will then weigh which is the better option for them.
“It is quite possible for them to walk away (and accept the windfall tax),” he said.
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