KUALA LUMPUR (June 22): Malaysia Rating Corporation Bhd (MARC) has affirmed its rating of AA-IS on Southern Power Generation Sdn Bhd's sukuk wakalah of up to RM4 billion, with a stable outlook.

In a statement today, MARC said the rating affirmation is driven by predictable cash flows from the power plant developed by Southern Power in Pasir Gudang that are deemed capable of meeting financial obligations under the sukuk wakalah.

The cash flow predictability, it said, is based on the 21-year power purchase agreement Southern Power has with offtaker Tenaga Nasional Bhd, which has a combined 70% direct and indirect interest. The remaining 30% interest is held by SIPP Energy Sdn Bhd.

Southern Power's 2x720MW combined-cycle gas-fired power plant in Pasir Gudang achieved commercial operation date (COD) on Jan 1 for Block 1 and Feb 19 for Block 2.  

MARC noted that the CODs were delayed for six months (Block 1) and eight months (Block 2) due to the adverse operational disruption caused by the impact from Covid-19, and that Southern Power has applied for an extension of time with a decision expected in 3Q21.

"Total cost has remained within the planned project cost of RM4.58 billion. Funded by a debt-to-equity mix of 80:20, the equity comprises redeemable preference shares of RM906.3 million which were fully subscribed and used to refinance the junior facility in September 2020," the rating agency said.