KUALA LUMPUR, Jan 23 – RAM Ratings has assigned a long-term rating of AA3 to Jati Cakerawala Sdn Bhd’s (“Jati” or “the Company”) Proposed Sukuk Murabahah of up to RM540 million in Nominal Value (2013/2023); the long-term rating has a stable outlook.
Jati is an investment-holding company that owns 80 per cent of Teknologi Tenaga Perlis Consortium Sdn Bhd (TTPC) - an independent power producer (“IPP”) that owns and operates a 650-MW combined-cycle, gas-turbine power plant in Kuala Sungai Baru, Perlis.
The rating of the Proposed Sukuk Murabahah has been notched down from that of TTPC’s Proposed Sukuk Murabahah of up to 835 million ringgit in Nominal Value (2013/2023) (“Proposed TTPC Sukuk Murabahah”) due to its lower priority to the latter in terms of both cashflow waterfall and security.
This is because the repayment of the Proposed Sukuk Murabahah depends on TTPC as the only source of cashflow (i.e. with Jati being an investment-holding company that relies solely on dividends from TTPC).
The 2-notch rating differential between Jati’s Proposed Sukuk Murabahah and the Proposed TTPC Sukuk Murabahah reflects the former’s low level of subordination and projected minimum subordinated finance service coverage ratio (“Sub-FSCR”) of 1.50 times (with cash balances, post-distribution and measured over a 12-month period on semi-annual principal repayment dates) throughout its tenure.
The strong Sub-FSCR covenant of 1.50 times ensures cash retention within Jati. Combined with the sturdy dividends from TTPC, Jati demonstrates a robust debt-servicing aptitude.
RAM has assumed that Jati will make distributions to its shareholders while adhering to financial covenants throughout the tenures of both the Proposed TTPC Sukuk Murabahah and the Proposed Sukuk Murabahah (i.e. on a forward-looking basis, as opposed to only the year of assessment).
Nonetheless, we highlight that Jati is expected to be circumspect in terms of its dividend distributions - and this is consistent with the management’s representation - as excessive distribution in any particular year may have a detrimental impact on its debt-servicing ability.
We derive comfort from TTPC (the source of Jati’s cashflow), which is deemed to have a strong business profile, underscored by the favourable terms of its Power Purchase Agreement (PPA) with Tenaga Nasional Berhad (TNB).
Since its commissioning on 31 March 2003, TTPC has maintained its commendable operational performance, having met all the performance requirements set out in its PPA.
Further comfort can be derived from the strong credit profile of TNB - the IPP’s sole off-taker - whose debt facility carries an AAA long-term rating, with a stable outlook. – Reuters