[RAM] RAM Ratings affirms Tanjung Bin Power's AA2 sukuk rating

RAM Ratings has affirmed its AA₂/Stable rating of Tanjung Bin Power Sdn Bhd’s (Tanjung Bin Power or the Company) RM4.5 bil Sukuk Ijarah Programme (the Sukuk).

The rating reflects the 90%-owned Malakoff subsidiary’s strong cashflow generation on the back of the sound operating performance of its 2,100 MW coal-fired power plant (the Plant), which enables it to service its sukuk obligations. In 2024, the Plant’s unplanned outage rate remained below the power purchase agreement (PPA) thresholds of 6% and 8%. This allowed Tanjung Bin Power to earn full available capacity payments equivalent to 85% of its capacity rate financial (CRF) under the favourable terms of its PPA with sole offtaker Tenaga Nasional Berhad (TNB). 

While the Company faces some demand risk for the remaining 15% of the CRF, stronger electricity sales, supported by strong dispatch demand from TNB, enabled it to earn full dispatch utilisation payments with bonuses for the year. Tanjung Bin Power’s heat rates also stayed within PPA requirements, allowing it to fully pass on fuel costs to TNB. 

On the latest sukuk repayment date of 16 February 2025, the Company’s finance service coverage ratio (FSCR, with cash balances, post-distribution) of 2.07 times remained robust, albeit below our earlier projection of 2.53 times. This was mainly due to coal inventory stockpiling, which caused cash reserves to decline to RM419.3 mil. We note improvement since then, with cash balances standing at RM636.5 mil as at 5 June 2025. Tanjung Bin Power plans to optimise coal inventory levels, currently at a surplus, to further support its liquidity position.

Going forward, RAM’s analysis indicates the Company’s dependence on its cash balances to meet future sukuk obligations with annual FSCRs (without cash balances)  projected to remain below 1 time for the remaining tenure of the Sukuk. Nonetheless, RAM’s stressed cashflow projections, which considered lower distributions among other variables, indicate that the Company should maintain minimum and average annual FSCRs (with cash balances, post-distribution) of 1.65 times and 1.97 times, respectively, supportive of its AA₂ rating. We note that there is limited headroom for potential operational issues and/or future cash outflows, including for working capital and distributions to its 90% shareholder, Malakoff Corporation Berhad.

As with other independent power producers, Tanjung Bin Power remains exposed to inherent regulatory and single-project risks. These include higher insurance premiums owing to an increasing aversion to coal plant investments, as well as potentially stricter environmental regulations as part of the country’s push for carbon neutrality by 2050.


Analytical contacts
Neo Xue Wei, CFA
(603) 2708 8241
xuewei@ram.com.my

Chong Van Nee, CFA
(603) 2708 8210
vannee@ram.com.my

Media contact
Sakinah Arifin
(603) 2708 8212
sakinah@ram.com.my