MARC RATINGS AFFIRMS TTM SPV"S AAAIS RATING

MARC Ratings has affirmed its AAAIS rating on TTM Sukuk Berhad"s (TTM SPV) RM600.0 million Sukuk Murabahah with a stable outlook. TTM SPV is a wholly-owned funding vehicle of Trans Thai-Malaysia (Thailand) Limited (TTMT) for the construction of two gas pipelines to transport natural gas from the Malaysia-Thailand Joint Development Area in the Gulf of Thailand to the industrial city of Rayong in Thailand (TTM Phase II). TTMT is a 50:50 joint venture between Petroliam Nasional Berhad (PETRONAS) and PTT Public Company Ltd (PTT), the national oil companies of Malaysia and Thailand.

TTM Phase II is part of the Trans Thailand-Malaysia (TTM) project, a strategically important undertaking involving the Malaysian and Thai governments via PETRONAS and PTT. The rating reflects MARC Ratings' assessment of a very high likelihood of support for this government-to-government project, and the strong credit linkages in the form of cross-acceleration and cross-default provisions between the rated sukuk and the term loan taken to finance TTM Phase I. The rating agency also believes that PETRONAS would have a strong strategic and reputational incentive to provide ringgit liquidity, addressing transfer and convertibility restrictions, if any. PETRONAS has a senior unsecured rating of AAA/Stable from MARC Ratings, based on publicly available information.

Long-term service agreements with PTT and PETRONAS provide strong visibility and stability to TTMT's cash flow. The cost-plus pricing structure also supports margin stability. Its unit capacity reservation charge (UCRC) - used to derive its capacity reservation charges/revenue - is designed to cover its operating costs and finance service obligations, while providing adequate shareholders' return.

TTM Phase II's revenue increased 10.2% y-o-y in 1H2024 to USD9.7 million, following a 4.8% y-o-y rise in 2023. This was driven by higher UCRC, which strengthened to USD149.33/mmscf in Janu