KUALA LUMPUR: Malaysian Rating Corp Bhd (MARC) has affirmed its rating of AA-IS on Tanjung Bin O&M Bhd’s RM470mil Islamic Securities (Sukuk Wakalah) with a stable outlook.
It said the rating reflected the credit strength of parent company Malakoff Power Bhd, which has provided unconditional and irrevocable undertaking in the form of cash deficiency support to top up any shortfall in the finance service reserve account for the Sukuk Wakalah.
The rating house has applied a full credit substitution approach on Tanjung Bin O&M’s credit risk assessment with Malakoff Power’s senior credit rating of AA-/Stable serving as the rating floor.
It said the rating considered Tanjung Bin O&M’s reliance on the operations and maintenance (O&M) service income from related company Tanjung Bin Power Sdn Bhd (TBP) under an O&M agreement (OMA).
The rating also benefits from a partial transfer of operational risks to MPower via a sub-OMA.
The rating house noted that the OMA and sub-OMA are coterminous with the 25-year power purchase agreement between TBP and Tenaga Nasional Berhad.
“Malakoff Power’s cash generation capacity relies on the utilisation level of TBP’s 2,100-megawatt (MW) coal-fired power plant as well as residual earnings of profit payments and principal redemption of loan stocks in related companies.
“In this regard, TBP’s standalone credit profile which has an implied rating of AA/Stable from MARC serves as the ceiling for the rating on the Sukuk Wakalah,” it said in a statement on Tuesday.
It added that the stable outlook reflected MARC’s expectations that TBP’s plant performance will remain satisfactory.