RAM Ratings said in line with the downward bias in global interest rates and the subsequent search for yields, domestic bond yields also retreated across the entire maturity spectrum and rating bands in June.
KUALA LUMPUR: RAM Ratings has reaffirmed the AA3/Stable rating of Edra Energy Sdn Bhd’s Sukuk Wakalah of up to RM5.085bil in nominal value (2018/2038).
It said the rating reflects Edra Energy’s strong project economics, underscored by its stable cashflow and resulting in a minimum finance service coverage ratio of 1.52 times under its sensitised case throughout the tenure of the Sukuk, commensurate with an AA3 rating.
The construction of Edra Energy’s 2,242-MW combined-cycle, gas-turbine (CCGT) power plant in Alor Gajah, Melaka has been progressing well.
As of June 30, 2018, the overall project completion came up to 18.5% - slightly ahead of the targeted 14.8%.
The plant will be the largest gas power plant in Malaysia to date, utilising General Electric Company’s (GE) latest 9HA.02 gas turbine (GT).
However, RAM Ratings said as the technology used for the turbine is untested and not yet in commercial operation globally, Edra Energy remains exposed to technology risk.
“A recently commissioned 9HA.01 GT plant (i.e. a scaled-down version of the 9HA.02 GT) in Pakistan has reportedly experienced some teething issues.
“We were informed that the case is still under investigation, and is likely to have been caused by design flaws with the combustor and gas temperature issues.
“According to Edra Energy, GE has represented that such issues are not expected to be encountered for the plant’s turbine,” it said.
RAM Ratings viewed that technology risk was largely moderated by Edra Energy’s long-term service agreement (LTSA) with GE for the operation and maintenance of the plant’s GTs, steam turbines and generators.
It also noted the 12-year tenure of the LTSA is also longer than the power purchase agreement requirement of five years.
In addition, GE has provided support in respect of the insurability of the plant, along with a special warranty to cover collateral damages.
GE’s willingness and confidence in providing support, along with its more than five-decade-long operating track record, are also positive factors, it said.
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