[RAM] RAM Ratings reaffirms Bakun Hydro's AAA/Stable issue rating

RAM Ratings has reaffirmed the AAA/Stable rating of Bakun Hydro Power Generation Sdn Bhd’s (the Company) RM5.54 bil Sukuk Murabahah (2016/2031) (the Sukuk). 

The rating is based on Bakun Hydro’s superior cashflow coverage throughout the Sukuk’s tenure, supported by its commendable operational performance, robust and predictable cashflow. Irrevocable and unconditional liquidity support from the Government of Malaysia (GoM), extended through a strongly worded letter of undertaking (LoU), also provides strong backing for the Sukuk. The LoU requires the GoM to top up any cash shortfall to ensure that Bakun Hydro’s annual finance coverage ratio (FSCR) is preserved at 2 times throughout the Sukuk’s life. 

Bakun Hydro’s operational performance remains fairly stable amid the ongoing COVID-19 pandemic, which has had a minimal impact on the Company given that it provides the essential service of power generation. In FY Dec 2020, Bakun Hydro’s revenue advanced 22.5% to RM1.38 bil (FY Dec 2019: RM1.13 bil). The jump reflects water tariff pass-through revenue following a water tariff hike in January 2020. Excluding this, the Company’s top line and operating profit before depreciation, interest and tax (OPBDIT) are still a respective 3.1% and 6.2% higher. As at the last sukuk repayment date of 11 August 2021, Bakun Hydro’s FSCR of 2.65 times. 

Under RAM’s sensitised case, the Company may need a single top-up of about RM400 mil from the GoM in 2029 to support an FSCR of 2 times, in view of a lumpy repayment on its unrated RM1.0 bil Government-Guaranteed Sukuk in 2028. The top up however is only reflected in the sensitised scenario, which assumes lower revenue. Bakun Hydro may consider refinancing the RM1.0 bil sukuk closer to the bullet repayment date, in the event of which a top-up will not be required. 

Bakun Hydro owns and operates the 2,400 MW Bakun hydroelectric plant under a power purchase agreement with Syarikat SESCO Berhad (SESCO) that runs up to 31 March 2043. The Bakun dam, which the Company owns, is Malaysia’s largest producer of hydro-powered electricity and key to the development of the Sarawak Corridor of Renewable Energy. The Plant was fully commissioned in July 2014. 


Analytical contacts
Wong Ee Loo
(603) 3385 2521
eeloo@ram.com.my

Chong Van Nee, CFA
(603) 3385 2482
vannee@ram.com.my