KUCHING: RAM Ratings has reaffirmed the AA1/Stable rating of Sarawak Energy Bhd’s (SEB) sukuk musyarakah programme of up to RM15 billion (2011/2036).
According to a press statement, the reaffirmation of the rating reflects the strong support that SEB continues to enjoy from the Sarawak State and Federal Governments, given its pivotal role in the Sarawak Corridor of Renewable Energy (SCORE).
RAM viewed that the group to benefit from a “very high” likelihood of support from the Sarawak State Government in the event of financial distress, based on its rating methodology for government-linked entities. Notably, SEB’s financial profile remained in line with the rating agency’s expectations.
The rating is moderated by the group’s weak balance sheet and debt-servicing ability. In line with its hefty capitak expenditure (capex) programme, SEB’s debt load stood at RM6.1 billion as at end-of financial year 2013 (end-FY12 at RM6.28 billion).
“As a result of the lower debt level, SEB’s adjusted gearing ratio improved slightly to 3.44 times (FY12 at 3.71 times) while its adjusted funds from operations debt coverage (FFODC) remained relatively unchanged at 0.07 times (FY12 at 0.06 times).
“Its adjusted gearing ratio is projected to peak at 3.65 times in fiscal 2014 and its adjusted FFODC to improve slightly, averaging around 0.13 times between fiscal 2014 and 2018 as the hroup manages its costs and capex in accordance with its revised expectation of slower pace of customer demand,” it said.
RAM Ratings pointed out, “SEB remains exposed to demand risk, given the progressive take-up of power by SCORE customers relative to its immediate capacity expansion with the Bakun (2,400-MW) and Murum (944-MW) hydro plants.
“We note that a total of 2,100-MW of combined capacity has been met by committed demand from firm SCORE and export customers.”
Elsewhere, it noted SEB is inherently exposed to power-supply concentration risk as about 59 per cent of its current power supply emanates from the Bakun plant, which is owned by the Federal Government (via Sarawak Hidro Sdn Bhd).
“Reliance on Bakun is expected to be moderated when the Murum plant comes onstream in 2015. Any major interruption in power supply could undermine the state’s power system security and pose a challenge to SEB in negotiations with potential SCORE customers.
“However, we draw some comfort to learn that thegroup managed to secure new power purchase agreements and term sheets subsequent to the June 2013 blackout in Sarawak,” it commented.