[RAM] RAM Ratings affirms Edra Energy's sukuk at AA3/Stable

RAM Ratings has affirmed the AA₃/Stable rating of Edra Energy Sdn Bhd’s (the Company) Sukuk Wakalah of up to RM5.085 bil in nominal value (2018/2038), reflecting the Company’s strong debt coverage and steady cash flow from its 2,242 MW gas-fired power plant in Melaka, supported by the financial support from its parent, Edra Power Holdings Sdn Bhd (Edra Power, rated AAA/Stable) in the form of an irrevocable letter of undertaking (LoU).

The LoU obligates Edra Power to maintain the Company’s annual finance service coverage ratio (FSCR) profile of at least 1.50 times. The overall performance of the plant remains satisfactory, with modest unscheduled outages in 8M 2025. Although rolling unscheduled outages briefly exceeded the 4% threshold due to boiler tube leaks and other teething issues, the resulting capacity payment deductions were minimal (RM3.6 mil). Compliance with heat rate requirements enabled full pass-through of fuel costs to the offtaker, Tenaga Nasional Berhad. However, extended maintenance for fleet-wide turbine defects led to underperformance against contracted annual availability targets, resulting in RM124 mil in penalties, which were offset by warranty proceeds from General Electric.

Technology risks associated with the relatively new gas turbine model is mitigated by the Company’s long-term service agreement with the equipment supplier, GE Global Parts & Products GmbH (equipment supplier), which provides guarantees on output, heat rates and outage performance, ensuring timely access to critical spares.

Under RAM’s stresses, liquidity support of up to RM359 mil may be required from Edra Power to maintain the minimum FSCR, a figure substantially lower than previous estimates due to stronger than expected cash accumulation and updated cost assumptions. Management does not foresee any need for shareholder injections and projects cumulative dividends of RM2.2 bil from 2026 to 2037.

Edra Power’s RM1.1 bil of unencumbered cash reserves as of end-August 2025 underpin its capacity to honour its commitment under the LoU. Edra Energy itself held RM721.5 mil in cash as at August 2025, comfortably covering RM621.6 mil in financial obligations over the next 12 months. Sukuk profit and principal obligations of RM295.4 mil due in January 2026 are secured by the transaction’s Finance Service Reserve Account (FSRA) standby letter of credit procured by Edra Power.

The Company remains exposed to potential regulatory changes to the power purchase agreement and the proposed 2026 carbon tax, given the lack of visibility on the framework and pass-through mechanisms. Its single-project exposure also heightens vulnerability to force majeure events, though this is partly mitigated by comprehensive insurance coverage.


Analytical contacts
Tan Yan Choong
(603) 2708 8256
yanchoong@ram.com.my

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

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