[RAM] RAM Ratings closely monitoring developments of major plant outage related to Manjung Island Energy's Sukuk

RAM Ratings is following closely on the developments at TNB Janamanjung Sdn Bhd’s (TNBJ or the Company) 1,010 MW coal-fired power plant (GF2) after the unit’s major breakdown last month. RAM will reassess the credit impact on Manjung Island Energy Berhad’s (MIEB) AAA-rated RM3.86 bil Islamic Securities (2011/2030) (Series 1) as more details are made available. 

GF2 has been offline since the beginning of December 2023 owing to unexpected severe fractures in the intermediate pressure (IP) steam turbine. As it stands, damaged plant components have been sent back to General Electric’s (original equipment manufacturer) facility in Germany for a detailed assessment. The length of time required to restore GF2’s operations will depend on findings on the root cause of the disruption, the extent of damage to other parts of the steam turbine and subsequent remedial action. However, these can only be ascertained in the coming months. Prior to this, GF2’s performance remained volatile, registering a rolling unscheduled outage rate of 9.48% as at end-September 2023 (end-December 2022: 9.11%) - breaching the 6% limit stipulated in its power purchase agreement.

In the immediate term, the Sukuk is supported by TNBJ’s superior liquidity position, as seen from its finance service coverage ratio (FSCR) of 7.42 times on the most recent sukuk repayment date of 25 November 2023, more than the 2 times threshold required for an AAA-rated transaction. As at 31 December 2023, the Company had ample cash reserves of close to RM1 bil in addition to standby letters of credit for a total RM132 mil – equivalent to profit and principal repayments of Series 1, due within the next 12 months. 

Considering the current stage of investigation, RAM will only be able to assess credit implication for the Sukuk when more information becomes available. This includes a proposed rectification plan to restore plant operations, the quantum of capital expenditure required for repairs, the extent of revenue loss and potential insurance claims. 

MIEB is a special-purpose trust-owned vehicle established to raise funding for the construction of GF2, which sits adjacent to TNBJ’s existing 2,070 MW Sultan Azlan Shah power plant in Perak. By virtue of a Purchase Undertaking between MIEB and TNBJ, we view both entities in aggregate from a credit perspective. Apart from Series 1, MIEB also has a RM990 mil Islamic Securities (2011/2031) facility (Series 2) rated AAA(s)/Stable, reflecting the irrevocable and unconditional guarantee from Tenaga Nasional Berhad (rated AAA/Stable by RAM), TNBJ’s ultimate parent.


Analytical contacts
Seri Nuralya Munawir 
(603) 3385 2484
nuralya@ram.com.my

Lee Jo Yee
(603) 3385 2583
joyee@ram.com.my

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

Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my