ANNOUNCEMENT DETAILS

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ANNOUNCEMENT DATE
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24-Jun-2022
CATEGORY
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RATING ANNOUNCEMENT
SUB-CATEGORY
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RATING ANNOUNCEMENT
TITLE
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Sepangar Bay Power Corporation Sdn Bhd
ISSUER NAME
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SEPANGAR BAY POWER CORPORATION SDN BHD
DESCRIPTION
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CONTENT
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RAM Ratings has reaffirmed the AA1/Stable rating of Sepangar Bay Power Corporation Sdn Bhd's (Sepangar or the Company) RM575 mil Nominal Value Sukuk Murabahah (the Sukuk). 

The reaffirmation of the rating is premised on Sepangar's continued ability to generate robust cashflow to service its debt obligations, underpinned by the sterling performance of its 100 MW combined-cycle gas turbine power plant in Kota Kinabalu, Sabah (the Plant). 

Sepangar's sound operating performance is reflected in its consistent ability to operate within the performance limits prescribed by its power purchase agreement (PPA) with Sabah Electricity Sdn Bhd (SESB). For FY Dec 2021, the Plant recorded an average 12-month rolling equivalent factor of 92.09% (well above the 87% required by the PPA), enabling the Company to continue claiming full capacity payments (CPs), which it has done since 2015. Concurrently, Sepangar managed to fully pass through fuel costs to SESB, its sole offtaker, given that the Plant had operated within the stipulated heat rates. Sepangar also met its PPA requirement for 2M 2022.

In view of better than expected cashflow generation, Sepangar's finance service coverage ratio (FSCR) stood at 2.53 times (with cash balances, post-distribution) on the last profit repayment date of the Sukuk (3 January 2022), outperforming the projected 2.29 times given the better plant performance taking into account the dividend payment of RM8.3 mil to shareholders in July 2021. Under our stressed scenario, Sepangar is envisaged to generate an average annual pre-financing cashflow of about RM44.11 mil over the remaining tenure of the Sukuk. This translates into strong minimum and average annual FSCRs of a respective 1.80 times and 2.08 times (with cash balances, post-distribution, calculated on sukuk principal and profit payment dates) for the remaining duration of the sukuk facility. The ratios factor in an expected dividend distribution of RM7.3 mil in the upcoming principal rep
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