[RAM] RAM Ratings affirms RP Hydro's AA3/Stable sukuk rating

RAM Ratings has affirmed the AA₃/Stable rating of RP Hydro (Kelantan) Sdn Bhd’s (RP Hydro) RM975 mil ASEAN Green SRI Sukuk (2023/2043). The affirmation reflects our view that the project’s revised construction timetable remains within RAM’s rating assumptions, supported by contractual revenue visibility under long-term renewable energy power purchase agreements (REPPAs) and adequate liquidity buffers to absorb construction-stage delays.

The rating is underpinned by the strong expected cash flow from three run-of-river hydropower plants, backed by 21-year REPPAs with Tenaga Nasional Berhad (TNB, sukuk rated AAA/Stable/P1) as offtaker. These agreements provide a secure, fixed-tariff revenue framework once operations commence, although construction progress remains the key near-term rating constraint, alongside potential variability in generation output.

As at 28 February 2026, overall project progress at the Kuala Geris (25 MW), Kemubu (29 MW) and Serasa (30 MW) plants in Kelantan stood at 62.6%, behind the scheduled 80.4%. The revised construction timeline reflects to an estimated eight-month delay from the August 2026 guaranteed completion date under the RM915 mil fixed-price, lump-sum turnkey EPCC contract. Nonetheless, the management’s revised completion dates of February 2027 for Kemubu and Serasa, and April 2027 for Kuala Geris, remain within RAM’s downside sensitivity assumptions and ahead of the 14 June 2027 feed-in tariff deadline. The stable rating outlook assumes no further material delays or cost overruns beyond available buffers.

Delays stemmed mainly from earlier setbacks in authority approvals and access road construction, compounded by adverse weather, particularly affecting Kuala Geris and the transmission line alignment. The EPCC Contractors have implemented mitigation measures, including increased manpower deployment, double shift work arrangements and diversified equipment sourcing. Nevertheless, weather-related risks continue to pose execution challenges.

Even with sensitivities of a delayed commercial operation, lower energy output and higher operating costs, liquidity remains supported by contingencies totalling over RM45.8 mil and RM64.1 mil in accumulated interest income since issuance in 2023, providing a buffer beyond initial cash flow assumptions. The minimum post-completion finance service coverage ratio is projected at 1.65 times, commensurate with the AA₃ rating. Further delays, weaker generation or higher costs that materially erode these buffers could pressure the rating.

RP Hydro is jointly owned by Rising Promenade Sdn Bhd and Malakoff Corporation Berhad. Malakoff has demonstrated continued commitment to the project through progressive equity contributions, and we expect ongoing support, including the procurement of standby facilities to cover the RM30.8 mil contingency requirement and maintain the minimum required balance in the finance service reserve account. Timely availability of these facilities remains important to maintain the project’s liquidity profile during the remaining construction period.

While small hydropower plants are generally less complex to operate than thermal plants, long-term output and, in turn, debt servicing capacity may be affected by hydrological variability amid increasing climate uncertainty and upstream activities. Potential effects from TNB’s upcoming Nenggiri plant are not expected to materially affect water flows to RP Hydro’s facilities based on current assessments.


Analytical contacts
L Nurisya Abdullah
(603) 2708 8238
nurisya@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