[RAM] RAM Ratings affirms Manjung Island Energy's Series 1 and Series 2 sukuk ratings

RAM Ratings has affirmed the AAA/Stable rating of Manjung Island Energy Berhad’s (MIEB) RM3.86 bil Islamic Securities (2011/2030) (Series 1) and the enhanced AAA(s)/Stable rating of its RM990 mil Islamic Securities (2011/2031) (Series 2).

MIEB is a special-purpose financing vehicle for the construction of GF2, located adjacent to TNBJ’s 2,070 MW Sultan Azlan Shah power plant in Perak (GF1) (collectively, the Plants). As MIEB’s debt servicing relies solely on cash flows from TNBJ under a Purchase Undertaking, RAM evaluates both entities on an aggregate credit basis.

The affirmation of the Series 1 rating reflects RAM’s expectation that TNB Janamanjung Sdn Bhd (TNBJ or the Company) will maintain a robust debt servicing profile  throughout the tenure of the series. Our view is supported by the successful recovery of TNBJ’s Generating Facility 2 (GF2), following a near year-long outage caused by intermediate-pressure steam turbine damage in 2024. The enhanced rating for Series 2 is supported by an irrevocable and unconditional corporate guarantee from Tenaga Nasional Berhad (TNB, sukuk rated AAA/Stable by RAM), TNBJ’s parent.

Operational and financial performance at the Plants has improved, evidenced by lower available capacity payment (ACP) losses in 7M FY Dec 2025. GF1’s improved performance is attributable to rectification work and preventive measures addressing persistent boiler tube problems, among other challenges. Following TNB approval for a scheduled outage after the steam turbine incident, TNBJ received full ACPs for GF2, offset by an availability target (AT) penalty of RM383 mil for 2028. Despite initial operational challenges after GF2’s restart in early November 2024, associated ACP losses were relatively minor.

Given TNBJ’s historical performance volatility, RAM remains cautious of the Plants’ long-term operational stability. Our sensitivity analysis, however, indicates that TNBJ will sustain superior post-distribution finance service coverage ratios of at least 8.51 times throughout Series 1’s tenure, even under scenarios of continued annual ACP losses and elevated capital and operational expenditure. Debt coverage is further supported by significant cash holdings of RM1.67 bil as at 30 November 2025, comfortably covering RM172 mil of sukuk obligations due in the next 12 months. Additionally, Series 1 benefits from a 12-month standby letter of credit procured by TNB. Series 2 is structured with a RM990 mil bullet principal repayment on 25 November 2031, following full redemption of Series 1. Notwithstanding the corporate guarantee, TNBJ has proactively accumulated cash reserves to fully meet Series 2 obligations.

Declining coal prices, timing mismatches between coal purchases and energy payments received, alongside ongoing operating inefficiencies have constrained TNBJ’s ability to fully pass through fuel costs. The Company remained in the red in FY Dec 2024, largely due to the RM383 mil AT penalty provision booked for GF2’s prolonged outage. However, the resumption of GF2’s operations reversed this trend, leading to a pre-tax profit of RM61 mil in 7M FY Dec 2025 (FY Dec 2024: pre-tax loss of RM359 mil), although negative fuel margins persist. We expect profitability to improve, barring significant operational deficiencies or adverse fuel price movements.

As coal-fired power plants are the focal point of the government’s carbon reduction policies, TNBJ, along with other coal independent power producers, may face increasingly stringent environmental regulations and greater challenges in obtaining insurance or funding support.


Analytical contacts
Chew Chiang Lim
(603) 2708 8297
chianglim@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