KUALA LUMPUR (Apr 17): Malakoff Corp Bhd, through its indirect wholly-owned subsidiary Tanjung Bin Energy Issuer Bhd (TBE Issuer), plans to raise RM3.29 billion from the sale of Islamic bonds (sukuk) to finance the construction of its 1,000-megawatt coal-fired power plant in Tanjung Bin, Johor.

In a statement today, RAM Rating Services Bhd said it has reaffirmed an AA3 rating with a stable outlook to the sukuk.

"The rating reflects our view that TBE Issuer’s strong debt-servicing ability will remain intact despite the current setback in the construction progress of the plant," it added.

“TBE Issuer’s liquidity position remains satisfactory towards meeting its profit payment due in September 2016 even if there is a delay of up to six months,” said RAM co-head of infrastructure and utilities ratings Chong Van Nee in the statement.

The rating agency said upon completion of the plant, the company is envisaged to have a strong finance service cover ratio on payment dates (with cash balances, post-distribution) of at least 1.49 times and an average of 1.60 times.

The plant’s construction was 90.3% complete as at end-March 2015.

"The variance between actual and forecasted work progress had narrowed to 5.6% from 10.2% one year ago," said RAM.

"TBE Issuer is working towards achieving the scheduled completion date of March 1, 2016. The company believes this is achievable and any delays would not exceed a period of two months," it added.

TBE Issuer, a wholly-owned unit of Tanjung Bin Energy Sdn Bhd (TBE), which in turn is 100% owned by Malakoff, is the turnkey contractor tasked with developing, constructing and financing the plant.

TBE has a power purchase agreement with Tenaga Nasional Bhd (fundamental: 1.3; valuation: 1.8) to develop, finance, construct and operate the plant. TBE Issuer’s financial commitments will be supported by back-to-back payments from TBE.

In this regard, RAM said it recognises the strong credit link between these entities and views them in aggregate.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)