[RAM] RAM Ratings assigns preliminary AA1 rating to Kimanis Power Dua's proposed RM580 mil Sukuk Wakalah Facility
RAM Ratings has assigned a preliminary AA1/Stable rating to Kimanis Power (Dua) Sdn Bhd’s (KPSB2 or the Company) proposed RM580 mil Sukuk Wakalah Facility (2026/2046) (Proposed Sukuk), reflecting the Company’s strong project fundamentals and strategic importance in Sabah’s energy sector.
KPSB2 is a 60:40 joint venture between Petronas Gas Berhad (PGB or the Group), via wholly owned PG Energia Sdn Bhd, and NRG Consortium (Sabah) Sdn Bhd, a state-linked entity wholly owned by Yayasan Sabah Group. KPSB2’s 100 MW gas-fired peaking power plant in Kimanis, Sabah (the Plant) – scheduled to start commercial operations on 1 June 2026 under a 21-year power purchase agreement (PPA) with Sabah Electricity Sdn Bhd (Sabah Electricity) – will be Malaysia’s first large-scale gas engine facility, using 18V51/60DF dual-fuel engine sets manufactured by Everllence SE. Together with the existing 285 MW combined-cycle gas turbine plant operated by KPSB2’s sister company, Kimanis Power Sdn Bhd (KPSB), both power plants will supply about one-third of Sabah’s installed capacity, underpinning grid reliability and regional energy security.
The preliminary rating incorporates an uplift from our view that PGB – the transaction’s primary sponsor – is highly likely to extend support beyond contractual obligations if necessary. This assessment is anchored by the project’s strategic importance to PGB’s expansion in Sabah.
KPSB2’s strong project fundamentals is supported by low offtake risk under an availability-based PPA regardless of actual dispatch, alongside provisions that allow full pass-through of fuel costs, mitigating exposure to fuel price volatility. While it is the country’s first utility-scale gas engine power project, the technology is well-proven globally. Experienced operational support from KPSB’s in-house operation and maintenance (O&M) team, PGB’s continued technical support, and Everllence’s long-term service agreement with performance-linked guarantees further lend support.
Entities making up the engineering, procurement, construction and commissioning consortium – Synerlitz (Malaysia) Sdn Bhd, China Energy Engineering Group Guangxi Electric Power Design Institute Co Ltd and CEEC Guangxi Electric Power (Malaysia) Sdn Bhd – have limited direct experience with gas engine technology but their broader track record in large power projects provides assurance of timely delivery, considering that construction progress is at an advanced stage. Although delays extending beyond 90 days from the scheduled completion is remote, any potential mismatch between delay liquidated damages (LDs) payable by the consortium and LDs payable to Sabah Electricity under the PPA is moderated by a RM27 mil contingency sum and RM25 mil of liquidity support under an irrevocable Letter of Undertaking from KPSB (equivalent to an aggregate 9.6% of the EPCC contract sum).
Even assuming a three-month construction delay, reduced plant availability, higher operating costs and zero fuel margins under RAM’s stressed cash flow analysis, debt service capacity remains resilient, with minimal reliance on cash reserves. The Company is projected to maintain compliance with the covenanted minimum 1.50 times post-distribution finance service coverage ratio throughout the Proposed Sukuk’s tenure.
Like other independent power producers, KPSB2 is exposed to single-project and regulatory risks. The latter is viewed as low in Sabah, where energy security remains a key policy priority. The proposed 2026 carbon tax to be imposed on carbon-heavy sectors introduces additional uncertainty pending clarity on the implementation framework and cost recovery mechanism.
Analytical contacts
L Nurisya Abdullah
(603) 2708 8238
nurisya@ram.com.my
Tan Yan Choong
(603) 2708 8256
yanchoong@ram.com.my