[RAM] RAM Ratings places Telekosang Hydro One's Senior Sukuk and Junior Bonds on Negative Rating Watch
RAM Ratings has placed the A1 rating of Telekosang Hydro One Sdn Bhd’s (TH1 or the Issuer) RM470 mil ASEAN Green SRI Sukuk (2019/2037) (Senior Sukuk) and the BBB1 rating of its RM120 mil ASEAN Green Junior Bond (2019/2039) (Junior Bonds) on Rating Watch with a negative outlook.
The combined cashflow generation from TH1's 24 MW small hydro plant and the 16 MW plant operated by its sister company, Telekosang Hydro Two Sdn Bhd (TH2), supports debt service obligations under the Senior Sukuk and Junior Bonds.
The Rating Watch is prompted by the force majeure notice issued by TH1 and TH2 (together, the project companies) on 3 March 2026 to Sabah Electricity Sdn Bhd (SE), the offtaker for the plants' electricity output. The notice follows severe flooding in the Tenom region in late February, which resulted in the temporary inability of both plants to generate and deliver electricity. The Tenom District Officer declared disaster status for the district on 25 February 2026.
As the event is beyond the control of the project companies, the force majeure declaration was made in accordance with provisions of the Renewable Energy Power Purchase Agreements (REPPAs) with SE. This allows the project companies to be excused from their contractual obligations under the REPPAs to the extent that the plants' performance is affected by the force majeure event.
Flood water has since receded and TH1 is conducting a full assessment of damage to the plants. While steps are expected to be taken to restore plant operations as soon as possible, the timeline for full resumption remains uncertain at this juncture.
In the immediate term, the Senior Sukuk is supported by cash and bank balances of RM35 mil as at 5 March 2026. This, along with about RM8.4 mil of outstanding payments from SE, should provide adequate cover for TH1's Senior Sukuk obligations of about RM43 mil, due within the next 12 months.
We expect the Rating Watch to be resolved within the next few months as more details are made available. Our assessment will focus on the extent of physical damage to the plants, the proposed restoration and repair plan along with the associated capital expenditure, the quantum and duration of revenue disruption and potential mitigation from insurance recoveries, if any. We will continue to monitor developments closely and make necessary updates when we have greater clarity on these issues.
RAM's Rating Watch highlights a possible change in an issuer's debt rating. It focuses on identifiable events such as mergers, acquisitions, regulatory changes and operational developments that place a rated debt under RAM's special surveillance. In a broader sense, the Rating Watch covers any event that may result in changes in risk factors relating to the repayment of principal and interest.
Issues are put on Rating Watch when some of the abovesaid events are expected to or have occurred. The Rating Watch, however, does not mean that the rating will inevitably be changed. It only means that RAM is evaluating the rating and a final affirmation is pending. A "positive" outlook indicates that a rating may be raised while a "negative" outlook indicates a possible downgrade. A "developing" outlook refers to unusual situations in which future events are so unclear that the rating may potentially be raised or lowered.
Analytical contacts
Karin Koh, CFA
(603) 2708 8237
karin@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