RAM Ratings affirms AA3 rating of Tanjung Bin Energy's RM4.5 bil sukuk

RAM Ratings has affirmed the AA3/Stable rating of Tanjung Bin Energy Sdn Bhd's (TBE or the Company) RM4.5 bil Islamic MTN Programme (2021/2041) (the Sukuk). 

TBE's finance servicing ability is expected to stay strong in view of the improved operating performance of its 1,000 MW ultra-supercritical coal-fired power plant in Tanjung Bin, Johor (the Plant). The sukuk rating is supported by standby letters of credit (SBLCs) procured by the Company's sole shareholder, Malakoff Corporation Berhad (Malakoff), to fulfil minimum required balances in the transaction Finance Service Reserve Account and Maintenance Reserve Account. TBE is an independent power producer (IPP) that owns and operates the Plant under a 25-year power purchase agreement (PPA) with Tenaga Nasional Berhad, which expires in March 2041. 

In FY Dec 2023, the Plant operated below the PPA unscheduled outage limit thresholds of 6.0% and 8.0%, which led to significantly lower availability capacity payment (ACP) reductions of RM39.0 mil (5.3% of full annual ACPs) (FY Dec 2022: RM151.3 mil or 21.8%). The Plant's rolling unscheduled outage rate was 4.1% as at end-December 2023, easing further to 2.4% as at end-June 2024. This contrasts with its peak of 33.0% as at end-May 2022, now that the Plant's damaged turbine blades have been repaired. 

These factors, along with a higher total electricity output of 6,462 GWh (fiscal 2022: 5,192 GWh), lifted TBE's revenue, partly moderating the impact of negative fuel margins and increased operating costs. Operating profit before depreciation, interest and tax (OPBDIT) rose 3.2% y-o-y to RM378.5 mil, with the OPBDIT margin coming in at 17.8% (FY Dec 2022: RM366.6 mil and 20.6%). The Company's pre-tax loss for FY Dec 2023 however widened to RM66.8 mil due to high finance costs and lower insurance claims compared to the year prior (FY Dec 2022: pre-tax loss of RM24.4 mil). 

That said, TBEs fi